Carl Icahn Sells his Entire Stake in $APPL, Is it the Next Nokia?

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The Guardian– Carl Icahn, the billionaire activist investor who has long been one of the most prominent voices declaring the company to be undervalued, says he has sold his entire stake in the technology firm, citing the risk of China’s influence on the stock.

After years of high growth, reaching triple-digit percentage points in 2015, Apple now sells more in China than it does in the whole of Europe. But sales in the country are now shrinking, with revenue dropping 26% year-on-year in the company’s latest quarterly earnings. Icahn’s concerns aren’t related to the China slowdown, however. Instead, the investor is concerned with the barriers to trade that China’s authoritarian regime might put in place.

“You can’t go into that business unless you’re like Samsung which is really like a country backing it,” Icahn told US cable television network CNBC. “A lot of people tried, a lot of people failed … In China, for instance, they will come in and make it very difficult for Apple to sell there. They could theoretically, you know … They’re basically in some senses I would say, perhaps benevolent but a benevolent dictatorship. I don’t know if benevolent is the right word.”

For those that do not know, Apple released their Q1 earnings report this past week. Analysts had been warning that this quarter would be the one where Apple finally falls from its insane climb, and the earnings seemed to match this sentiment. This is the first quarter in 13 years that Apple has recorded a YOY negative growth, in part because of declining sales for their iPhone line and troubling outlooks for their new Apple Watch line. The Guardian reported today that Carl Icahn, a mega-investor worth over $23B, has pulled out his entire $APPL position over scares of Chinese influence over the stock.

This is big news for APPL investors because when Carl Icahn pulls out of an investment, you pull out of an investment. It will become increasingly difficult for Apple to gain more traction in China, one of their biggest potential market growth areas. Fear of government regulations combined with declining interest of Apple products in favor of cheaper and more “fashion-friendly” phones have begun to gain market share. All technology shares seem to follow the Nokia bell curve of dominance, where they slowly rise to an insane market growth and maintain for a few years, only to then quickly fall out of grace. Although Apple has become synonymous with the cell phone and computer industry, do not think for a second that they can maintain this growth forever. Sales dropping over 26% on the quarter is a big signal that $APPL can no longer just put out another marginally-changed product and rake in billions. Without another huge innovation on Apple’s part, perhaps into the VR world, Apple may fall from its spot as world’s top tech stock. All I know is that I don’t think I have ever pulled out of something as fast as I have $APPL (Cromartie could learn a thing or two here).

-KJ

 

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