A big increase in Apple's dividend and share buyback is expected to be revealed on Tuesday during the company's earnings call. Unless Apple radically changes their business with a revolutionary (not evolutionary) new product or does a meaningful acquisition with all that cash, the odds are high that Apple's stock does worse than the overall market and that the multiple compresses.
From a short-term perspective, the stock may go up tomorrow given the increased capital return and expectations for a horrible guide for the June quarter. I would use that opportunity to sell the stock and not buy it back until you feel compelled to spend money to upgrade to their latest and greatest phone.
I still love my iPhone. It is a great product, but Apple as an investment merits an underperform rating, which is why it is important to separate great companies from great investments. Of the 45 analysts covering the stock on Wall Street, 64 percent have a buy rating. No one has an underperform rating, but someone has to be first. If I were still an analyst, that would be me.
Commentary by Dan Niles, founding partner of AlphaOne Capital Partners and senior portfolio manager of the AlphaOne Satori Fund. Previously, he was a managing director at Neuberger Berman, a subsidiary of Lehman Brothers. Follow him on Twitter @DanielTNiles.
Disclosures: Dan Niles, his family and AlphaOne Capital Partners currently have long and short equity investment positions in Apple Inc. in different funds, which is subject to change at any time and without notice.
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