Dougie Kass
Hedge Fund Manager, President of Seabreeze Partners
Apple is worth considering as a short because its rise is driven by flows, not fundamentals. Money rotating out of AI spenders has gone into Apple precisely because it is not spending on AI, even after a poor quarter. Growth is slowing and the company has not innovated much in 10-15 years, living off price increases, buybacks and passive index flows. It now trades at 40x earnings at an all-time high. x.com
Apple's roughly 40 times trailing and 37 times forward earnings make the shares too expensive ahead of next week's results. A short looks reasonable, though a sell-the-news reaction after earnings remains uncertain. x.com x.com
Apple's price is held up by index dispersion and gamma positioning rather than its business value. Its supposed bull case is that, as a non-AI name, it moves inversely to AI stocks; only flows strong enough to break the gamma grip permit price discovery. Fair value is 75% below the current price. x.com
Apple has the most predictable cash flows, including future cash flows, and that dependability appears to be what investors reward. Its P/E is about 40 versus 27 for Nvidia, 22 for Meta and 16 for Alphabet; Meta's free cash flow has turned negative. Leveraged build-out companies have been hit hardest while Apple has outperformed, but Apple investors could be wrong and the point at which its premium becomes too high remains open. x.com x.com x.com
Apple's valuation pays too hefty a premium for its expected long-term earnings growth. Its forward P/E-to-growth ratio is 2.58; even if the market sees its hardware moat and ability to exploit others' AI investments despite underinvesting itself as a winning strategy, that premium is too high. x.com
Apple's growth has come largely from financial engineering and multiple expansion, while sales are stagnant and its net cash is gone. The market pays high multiples for predictable earnings, treating Apple and Costco almost as bond alternatives, but the re-rating has gone too far. Apple's ecosystem is weaker than people think: a free high-end Android or a device 10x more exciting from Samsung or a rival could pull many users away. Waiting for a sub-10x ex-cash multiple again makes sense. x.com
Apple is a good hedge in this market because it benefits from AI without having to put up the capex. It has the best distribution on the planet and is not going anywhere. x.com
Apple's growth valuation gives too much credit to a $2,000 folding iPhone and a touchscreen MacBook. Its 36.16 forward P/E and 3.54 PEG are higher than recent readings over the past two years, making this a point to take serious profits. x.com
Apple looks like a short because paying 36x next-twelve-months EPS seems crazy, and the stock is up against resistance from its 2020-2021 highs on a linear chart. x.com x.com x.com
Apple is the cheapest of the Magnificent Seven on free cash flow and has the highest pricing power, yet it is always labeled expensive for its growth. Disliking Apple has become trendy even among quality investors, where it screens phenomenally well. x.com
Apple looks too expensive to buy at 34x earnings. x.com
