Apple has crossed the key $500 a share mark, but Joe Magyer, senior analyst at The Motley Fool, is warning shareholders that the tech giant doesn’t have much further to go.
“If you are an Apple shareholder, there is a built-in expectation that the stock will outperform because results have been so strong on the topline,” Magyer told CNBC on Tuesday.
“You’ve seen the halo effect playing out, and if you’re an Apple shareholder you are absolutely confident this will keep rolling forward. Now, whether or not that happens, I think I am a little more skeptical,” he said.
Magyer pointed out that historically, consumer electronics companies suffer peaks and troughs.
“I know Apple doesn’t seem like it’s capable of ‘troughing.’ But that’s certainly going to be the case at some point, and I don’t think that’s baked into the stock price right now,” he warned.
For Magyer, the main issue at Apple is the inevitable slowdown in growth.
“Obviously, they are not going to be able to sustain growth above 70 percent on a rolling basis," he said. “When you think about where the company is in terms of its growth story, it’s already getting most of its revenue outside of the U.S.
“So, they’ve already pretty well saturated their core (domestic) market, they’ve already got out there and hit all of the… emerging markets, and developed economies outside of the U.S.," he continued. “I don’t think there’s a lot of low hanging fruit.”
Magyer also warned that a share buyback may be on the horizon, as Apple continues to hoard cash.
“I’m hoping they return (cash) via some sort of special dividend,” he said.
Magyer feels that, in terms of returning cash, one of the worst things the company could do would be a share buyback.
“I know that’s not something Apple bulls want to hear,” he said. “In reality, it would be somewhat of a tragedy for these guys to not buy back any stock.”
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Joe Magyer has no positions in Apple.