Apple reports its quarterly earnings later today, and while most people are optimistic, one analyst is throwing out a warning.
Referring to the so-called FAANG stocks of Facebook, Apple, Amazon, Netflix and Google, analyst Larry McDonald warns that the tech giants have the potential to lose more than a third of their value. Is this the time to quit AAPL while you’re ahead? McDonald says you might want to get the hell out of Dodge.
Speaking to CNBC ahead of Apple’s quarterly earnings, McDonald, editor of the Bear Traps Report, said, “These are stocks you want to run away from. I see potentially 30 percent to 40 percent downside on the FAANGs.”
Referring explicitly to Apple, McDonald said investors should stay away from the “hottest stock in the hottest sector.”
McDonald’s reasons to be concerned about Apple include the burgeoning trade war with China, which could hit Cupertino’s supply chain, and what he calls “passive investing.” That refers to markets where capital is placed in market-weighted indexes, as opposed to individual stock picks.
“About $6 trillion has come into passive management in recent, say, last five to 10 years, and all of that money has to go into the FAANG stocks,” McDonald said.
Always bet on Apple?
It’s worth noting that McDonald’s pick does make him a contrarian. While there’s no doubt that Facebook has been a FAANG stock hit particularly hard recently, Apple has gone from strength to strength. So have fellow FAANG stocks Amazon and Alphabet, both of which show overall upward trends this year.
Indeed, most of the financial conversation about FAANG stocks right now seems to concern whether it will be Apple or Amazon that finally becomes the first company in history to hit the fabled $1 trillion valuation.
Samsung, Twitter slump after earnings reports
Not all big tech companies are doing well, however.
Apple frenemy Samsung reported a lower-than-expected quarter Tuesday, falling short of investors’ projections. The company’s April through June net revenue hit $9.8 billion. This was up 2 percent from a year earlier, but less than what investors hoped for.
Twitter also ran into problems last week, with around 20.5 percent of the company’s value wiped out.
For more information on what to look out for from Apple’s next quarterly earnings, check out this post from my colleague Buster Hein. As ever, Cult of Mac will also be live-blogging the Apple earnings call, starting 2 p.m. Pacific today.