Apple skeptic says company ‘in trouble’ ahead of HomePod launch

Apple has lost some of its bite, one strategist says.

Fiercer competition and an inflated belief in its own products are among some of the challenges facing the world's largest company, according to BK Asset Management's Boris Schlossberg.

"I do think they're in trouble. I think they're making a huge mistake," Schlossberg, managing director of FX strategy, told CNBC's "Trading Nation" on Tuesday. "They're basically betting on the fact that high expensive products can be sold at this point and it's clearly becoming evident that everybody has caught up to them in the marketplace."

Schlossberg's concerns over Apple pricing resurfaced ahead of the launch of its Siri-connected artificial-intelligence home device, the HomePod. With a $349 price tag, its latest product is far more expensive than its major competitors, including Amazon's Alexa-equipped Echo or Google's Home Mini.

"Nobody is going to buy it at the price that they're putting it out right now because the functionality of those products is just nowhere near as great as it needs to be relative to the price difference," said Schlossberg.

Worries over softening iPhone sales have also spread among a number of analyst firms. J.P. Morgan estimates a 50 percent quarter-on-quarter drop in sales of its high-end iPhone X, while Atlantic Equities downgraded its rating to neutral from overweight on signs of weaker iPhone demand.

Max Wolff, chief economist at The Phoenix Group, is cognizant of weaker iPhone sales trends but does not expect those issues to come into focus as soon as this quarter. Instead, he sees Apple still in a position of strength.

"They command a high price. They're sitting on a ton of cash. The tax breaks help them," he said. "I don't think they're a bad bet for the next couple of quarters, certainly not this one, but there are some storm clouds on the horizon for sure."

Analysts generally expect an upbeat quarter for Apple with quarterly adjusted earnings and sales both rising by 11 percent. Sales of the iPhone, the best-selling Apple product and its largest topline contributor, are forecast to climb by 10 percent. Apple has come in above analysts' consensus in the past six quarters. The company is due to report its fiscal first quarter on Feb. 1.

Reports of weaker iPhone demand have roiled Apple's stock price this week. Since Monday, shares have dropped 2 percent and are on track for their first negative weekly performance of the year. Its stock is up around 3 percent since the beginning of 2018, roughly half the S&P 500's year-to-date gains and is one of the worst performers in the technology sector. The Technology Select Sector SPDR ETF has risen 7 percent in January.

Even so, Apple shares remain in a solid position after closing out 2017 with its best annual gains since 2010, the year it launched the iPad. Shares are nearly 3 percent from an all-time intraday high set on Jan. 18.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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