Apple is a stock to avoid right now, this fund manager says

Shares of Apple (Apple Stock Quote, Chart, News NASDAQ:APPL) have once again been nipping at all-time highs, which bodes well for current shareholders but makes it difficult for new investors, even for those fans of the company.

But portfolio manager Lorne Steinberg says the difference between a great company and a great stock is sometimes large, with Apple currently being a clear example.

“It’s unquestionably one of the world’s great businesses but for us, not a cheap enough stock,” said Steinberg, president of Lorne Steinberg Wealth Management, speaking on BNN Bloomberg on Tuesday. “The whole stock is still tied to the iPhone for the most part, and one question we have is, with the economy in the state that it’s in, are people going to spend $1,000-plus for a phone?”

Apple should be coming out with its iPhone 12 line of devices this fall, said to be the company’s first 5G supported version of the iconic smartphone, putting Apple behind makers including Samsung who have already brought out 5G connectivity-enabled phones.

The iPhone 12 line will come with less expensive versions as well as reportedly a smaller 5.4-inch version of the 12, for a total of four models.

Apple’s iPhone sales have been a perennial worry point for investors who see a company which along with its Mac line has had a couple of revolutionary devices over the years in the iPod and iPhone but these days seems a little in short on grand new ideas.

The company is still growing its revenue, however, even through the tougher COVID-19 pandemic period, as witnessed by its latest earnings report delivered on April 30. There, Apple’s fiscal second quarter 2020 (ended March 28) featured revenue up one per cent year-over-year to $58.3 billion, with its Services revenue hitting a record $13.3 billion. (All figures in US dollars.)

“Despite COVID-19’s unprecedented global impact, we’re proud to report that Apple grew for the quarter, driven by an all-time record in Services and a quarterly record for Wearables,” said Tim Cook, Apple’s CEO, in a press release. “In this difficult environment, our users are depending on Apple products in renewed ways to stay connected, informed, creative, and productive.”

Apple posted Q2 earnings of $2.55 per share, whereas analysts had expected $2.26 per share on a top line of $54.54 billion. Management declined to give guidance for the upcoming, citing uncertainties surrounding COVID-19, although the company said after a steep drop-off in February and March, sales began to pick up in April.

Steinberg said phone sales are likely to be weaker than expected in the upcoming quarter.

“We don’t have a comfortable entry point here,” Steinberg said. “It’s certainly a stock we’d love to own, but it would have to be at a cheaper price.”

After having an incredible year in 2019, with the stock returning 86 per cent, APPL kept climbing through January and early February before falling with the wider market pullback in February and March. Currently for 2020, the stock is up ten per cent.