Fred Hickey Believes the Stock of Apple Has Peaked and Worse

By on May 14, 2012

Fred Hickey - High-Tech StrategistApple has been the producer of some of the most popular products of the past 10 years.  From iPods to iPhones, Apple has become iT.  Throughout history fads have captured the minds of the public; especially impressionable youthful consumers.

I recall nearly every kid in my high school wearing puka shell necklaces at one point in time.  I thought the whole thing with the shells was kind of silly so I never joined the puka frenzy.  Puka shells adorned the necks of 95% of the high school lemmings for about two weeks then they were completely gone – poof.  You couldn’t find a single person wearing them.

Granted, comparing puka shells to Apple is not the greatest analogy.  Apple does produce good products which consumers spend a lot of money on and find more useful than a few shells around their neck.  However, I do detect substantial fad appeal in their offerings and would guess that their average consumer is under the age of 30.

Fred Hickey, a long-time observer of the tech industry who has seen his share of fads over the years,  has  been covered in a recent Forbes article by Eric Savitz.  It appears Hickey believes the Apple story has peaked and the stock could be headed for more trouble than the mere 10% drop it has already experienced.  In Hickey’s latest newsletter he expresses concern about the state of the world economy and speculative activity in parts of the tech world.

Hickey is revealed to have traded Apple shares several times over the past decade, making his most successful bets on the short side.  Now Hickey believes Apple has gotten too big for its britches with its unsustainable $600 billion valuation.  He reminds us that Apple is a “consumer product company subject to the whims of consumers” and it cannot sustain the profit margins it is achieving on its commodity type products.

Hickey doesn’t believe Apple will reach the $1,000 stock price target bandied about by analysts pointing out other tech companies (Sun Microsystems, Cisco Systems, Microsoft and Nokia) whose stocks failed their investors.

A final warning from Hickey:

“Narrow markets, concentrated positions, frenzied stock action, IPO mania, cult stocks and disregard for valuations were the conditions preceding the 2000-2002 tech stock collapse, the 2008-2009 bear market and the 1973-1974 bear market, which ended the Nifty Fifty era. This is possibly another danger moment for tech investors.”

Source: Forbes

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