The Case For Shorting Apple

Apple (AAPL) is one of the most recognizable companies on the planet, it has a market cap larger than the GDP of most countries (nearly $800 billion), it brings in revenue of well over $200 billion a year and its cash reserves alone are larger than most Fortune 500 companies (over $250 billion). Investors who bought Apple stock when it went public in December 1980, would have made a 37,878.8% return at Apple’s current price. These facts have made Apple stock a piece of virtually every person’s portfolio, from Warren Buffet’s to the High Schooler who has just opened his first brokerage account. However, many people, including the media and analysts seem to be ignoring several key facts about Apple that could send the stock falling over the next few months.

For the most part Apple has been a great investment over the years as the stock remains in an upward long-term trend, but there have been periods where the stock has gone through significant corrections of 30-40%. I believe the stock may be nearing one of those corrections now. 

Apple stock from 2011 to September 26th, 2017

By looking at the chart above it easy to notice how Apple stock is at the top of the trend it has kept since 2012, the last two times the stock was at the top of the trend, in 2012 and 2015, the stock proceeded to crash 40% and 30% respectfully. This on its own means little to most people, the stock could continue to rally on fundamental reasons and break the trend. However, Apple’s most recent rally, which has seen the stock surge nearly 70% in the last year and a half, has been powered by the expectation that Apple’s most recent products will be wildly successful and usher the company into a new age of innovation.

 Apple has recently released a new series of products, including 3 new iPhones, a new smart watch, an improved T.V box and a slate of new software features. The most important of these products is the iPhone X, the phone which is meant to mark the 10-year anniversary of the iPhone and represent the innovation that made the company what it is today. The iPhone X is indeed a major upgrade over previous models, with features such as facial recognition (which Apple calls Face I.D) and wireless charging. Unfortunately, Apple’s stock price hangs entirely on the success of this specific model. There have been few fundamental reasons behind Apple’s recent rally meaning markets have mostly priced in the success of the iPhone X so any hiccup whatsoever could have serious consequences.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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