Are Apple shares cheap? Now that they've fallen over 10 percent on the back of Apple's recent product launch, it seems to be a fair question. But even though Apple now has a lower price-to-earnings ratio than do slow-growth companies like Microsoft, Intel, or IBM, Doug Kass says the stock still doesn't present an attractive value.
"Apple has become a value trap," the founder of Seabreeze Partners Management said. "This is a company with no growth, and profit margins that are way too high vis a vis the competition."
Indeed, at its latest media event, Apple disappointed many investors but not releasing a much cheaper iPhone, as some had been pining for. Instead, Apple released more high-end phones that will keep profit margins high, but threaten to do further damage to the company's already-declining market share.
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"We remain disappointed with Apple's decision to remain a premium priced smartphone vendor," Credit Suisse analyst Kulbinder Garcha wrote in a note that downgraded the stock to "neutral" from "outperform" after the event. "On our new estimates, Apple's smartphone share will decline to 15.5 percent/13.1 percent this year and next from 18.1 percent last year."
But Kass says that there's a second issue at work: While Apple's prices have stayed high, the company has not delivered innovation to keep pace.