Keith Gilabert of Fina V Capital says, “Apple shares are expensive for a hardware firm, and iPhone unit growth is decelerating due to the overly saturated smart phone market. We have a long-term target for Apple of $59.00 per share.”
Beverly Hills, CA -- (SBWIRE) -- 06/27/2014 -- Fina V Capital has issued a cautious report on shares of Apple (AAPL) as the stock recently added $100 billion in value in just three months. Apple is currently trading at $91.98 per share with a market value of $554 billion.
Gilabert states, “Our rating on Apple is purely based on valuation, we believe Apple is a great company but the stock is overvalued. There is no reasonable justification for its valuation to be greater than Google or even Microsoft. Apple stock is up because of over-hyped expectations on the new iPhone 6 and some very savvy financial moves to increase the share price but none of this will sustain the high stock price long-term.”
Apple has been making capital allocation strategies to increase its stock price. Apple’s new iPhones will not be out until later this year and it has not shown any organic growth for two quarters.
Revenue growth has slowed down significantly since 2011. Apple experienced revenue growth of over 80% back in 2011 due to strong sales of iPhones and iPads.
Fina VC reports, Apple’s gross margins peaked in the first half of 2012 at over 47%. The current direction of the stock will come down to growth of market share and profit margins. Looking at 2014, Apple is expected to grow revenue at about 11% and declining in 2015 to 8%. The gross margin is expected to rise by about 5% for expected earnings growth of approximately 11%.
Gilabert states, “The fact that Apple stock has almost returned to its all-time high of $700 a share on lower earnings growth than the last five years is a bit concerning. As a professional trader its important to recognize maturing tech, we’ve all seen what happened to MSFT, INTC and CSCO.”
Apple’s growth has been driven since 2007 by the iPhone. However, the smartphone market is becoming increasingly saturated, considering 53% of Apple’s sales came from iPhones in 2013 this is a negative.
“This slowdown in smartphones should not come as a surprise, there were over 1 billion smartphones shipped in 2013 alone. Considering that most iPhones are being sold to repeat customers Apple will need to find new innovative strategies for growth. Capital allocation tricks don’t make great stocks, it’s all about innovation,” according to Gilabert.
Fina V Capital target price is $59.00 per share base on the expectations of margins being compressed further.
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About Fina V Capital
Fina V Capital serves entrepreneurs by providing less dilutive, more flexible forms of capital. We provide senior and subordinated term loans in the $1 million to $20 million range to emerging businesses backed by venture capital and private equity firms. Target clients range from emerging growth companies led by dedicated entrepreneurs to late-state, established companies seeking cash-flow for expansion. We give our clients access to our contacts of Fortune 500 companies which will add diversity to their product lines and help fuel growth. There are less than a dozen consulting firms worldwide that can offer this level of service.