Apple could decline 70% in the coming years

Despite being the world's most valuable company, some analysts believe the stock stands to lose much of its value in the next few years.

By Benzinga Dec 5, 2012 12:14PM

appleBy Louis Bedigian


Apple (AAPL) is in the midst of a multi-year decline that will shave 50% to 70% off its peak value of more than $700 -- that's according to Paul Schatz, President and Chief Investment Officer of Heritage Capital, who spoke on Breakout Tuesday morning.


Schatz made the original call in a late April, early May interview. "It wasn't really about the nuts and bolts of Apple, per se," Schatz explained, "it was about every bull market [having] a story stock. You can go back -- I've gone back 100 years -- every single bull market has a story stock. When the bull market ends, the story stocks are taken out and shot."


In 2007, the big story stock was Google (GOOG). "We all saw where Google declined to in '08 and '09," Schatz told Benzinga. "In 2000, it was AOL (AOL) and Yahoo (YHOO), and you saw what happened with those. You can go back to GE (GE), which was a story stock, GM (GM), RCA, Navistar (NAV)."


Sometimes there is more than one story stock. "The common thread is [that] the story stock becomes somewhat ingrained in our investing fiber, as Apple certainly has -- it can do no wrong," said Schatz. "Everyone is talking about how cheap it is based on the [price to earnings ratio]. And my cautionary words are, 'So were the housing stocks in 2007.' They were all single-digit [price to earnings ratio]s and the banks weren't far behind. So was GE."


"What we never anticipate is that when companies mature they go from growth companies to value companies, and that is what I imagine Apple becomes. Apple loses its growth allure. It's already paying a dividend. I expect its dividend to go up, up, up over the years. It's going to become more like a Microsoft (MSFT) and an Intel (INTC) rather than a high-growth company." (Microsoft owns and publishes Top Stocks, an MSN Money site.)


What about Google's rebound?


"Google, during the bear market, went from -- I'm going to round from memory -- roughly $750 to $250," Schatz explained. "That's a pretty big decline. You're talking two-thirds of the stock going down in 18 months."


Regardless, Schatz said, there is nothing to stop a declining story stock from rebounding. "But we haven't even gotten to the stage where Apple has been taken apart yet," he said. "Apple, from the bear market, went from $92 all the way to $700. So when this bull market ends, I think Apple will have the same fate as we saw with Google."


Schatz added that Chevron (CVX) and Exxon (XOM) were once similar to Apple and Google.


"And those companies are great long-term success stories," he said. "But they went from ascending at a 60-degree angle to ascending at a 25-degree angle. They become much different after they lose that story stock status."


No matter what happens, Schatz told Benzinga that he thinks Apple is a great company. "But just because it's a great company doesn't mean that it won't go down in price," he said. "If $700 was the peak, maybe it gives back half to two-thirds of the rally it made from $90 to $700. That would put it between $300 and $400."


More from Benzinga

Dec 5, 2012 1:22PM
I am getting sick of analysts who just look at charts and really seem to have no clue about a particular sector or business.  I would say Apple will go down as it's products are no longer innovative but incremental.  It's competitors are coming out with products that are just as good for much less price, and they are getting easier to use (Apples big selling point).  Apple will still be a huge company but ultimatly I don't see it putting up the huge earnings year after to year to justify it's price.  All the China factory stories are not helping it's image and it's 30% of profit it takes from app makers will start to push 3rd party app makers to other platforms especially as Apple's market share begins to decline, and it will.
Dec 5, 2012 5:39PM
Apple has been overhyped for several years, as the "cool" and trendy alternative to Microsoft. It is made for consumers of information, not creators of information, which means for entertainment and not for business. Apple stock should only be trading in the $200-250 range, not around $700. Its price will drop during 2013-2014 to a more correct level. Apple's leading market share in phones, music, and tablets will erode quickly during 2013, and its aura as a producer of innovative "must have" products will finally meet with reality. Microsoft's Windows 8, Office 2013, phone, tablet, and server/enterprise products will lead an era of non-Apple companies flooding the market with new products capable of directly competing with, and surpassing, Apple products. I do not believe Apple will be able to effectively respond to the competition. By 2015, I expect apple to start selling off its less profitable areas of business and start to concentrate on it most profitable areas - tablets and phones.

$700/share, what a joke.  In twenty years, Crapple won't even exist.  Remember Kodak.

Dec 5, 2012 2:41PM
Apple is not at the moment just yet, but the truism of these scenarios should serve as a reminder to all investors that nothing is indefinite.  As Evil Chris pointed out, Apple is moving toward a maintenance (instead of innovative) mode, but as the source of this story (Schatz) alluded at, this is just part of the cycle for all organizations (small-to-large companies, nonprofits, sports teams, markets, industries, countries, local-to-global companies, etc) is way easier to have +50% growth as a small company or firm (hence why the S&P has outperformed all other indexes over the last 100 years), but once every company hits the $500M, $1B, $25B, $50B, and so on; they have to restructure and that growth inevitably shrinks, but 10% growth on $50B is a lot more than 50% on $1B!  Apple will be fine, but will it holds its place has the worlds largest company for much longer, commodities (especially nonrenewable) hold a raw and less volatile value; Exxon will regain it's throne or possibly the next upcoming tech/life science will! 

Happy Investing!!!
Dec 5, 2012 5:06PM

Wow what a revelation.  In the crash of 2008 and 2009 when the entire market declined 40-50% Google went down too.


So we can expect Apple to decline if the market crashes.


Just days before the stock hit 700.00  it was predicted Apple would hit 1000.00   now you predict it will decline 70%?  Apparently the only thing predictable is the predictions will be wrong.

Dec 5, 2012 1:12PM
A headline written just to grab attention. Yawn !
Dec 5, 2012 12:31PM
Not going to happen unless the world economy totally falls apart.
Dec 5, 2012 2:36PM
Now I feel like there should be another board for these analysts. They put in anything on the board for their living. One bad news on Apple, these guys will jump in and conclude something irrational. Same goes for Microsoft too. Too much load of garbage to digest.
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