I see five reasons why Apple shares are a screaming sell.
1. Shrinking China opportunity
A year ago I wrote that Apple was too heavily dependent on one product -- the iPhone -- and one country -- China.
It took almost a year but last month the consequences of that prediction became clear -- Apple reported a drop in Chinese sales.
On April 26, Apple reported its first quarter of declining growth in 13 years. Those sales fell a whopping 13% as Apple sold 16% fewer iPhones than it did in 2015, its revenues from greater China fell 26%, and net income plunged 22%, according to the New York Times.
To be sure, China is a huge market -- but the country's leadership seems to favor domestic rivals over foreign ones like Apple. On April 21, China cut off its citizens' access to Apple's online book and movie services, according to Reuters and Apple said it hoped to get them switched back on.
The overall market for smartphones in China plunged in the first quarter. According to Strategy Analytics, China smartphone shipments fell 30.6% to 38.3 million in the first quarter of 2016.
And Apple lost China market share to rivals. Apple ended the first quarter in fourth place with 11% of the market -- shipping 14.8% fewer units there than it did in the same period of 2015.
Meanwhile Huawei enjoyed a 48.2% surge in shipments to occupy the top spot with 15.8% of the market while OPPO took second place with 12.6% market share and a 67% increase in shipments, according to Strategy Analytics.
2. Limited India Access
If China is shrinking is there hope in India?
With 1.2 billion people, the market potential there is huge.
India smartphone growth was up 23% in the first quarter of 2016, according to Counterpoint. Only 21% of India's population owns smartphones suggesting significant growth potential -- especially if the price is right.
But Apple found that a big portion of that market could not afford to pay the retail price
So it concocted a plan to sell used iPhones in India. It sounded very clever -- since the used devices would be inexpensive for Apple to buy and refurbish and would be sold at a low enough price to make it affordable for people with lower incomes.
India announced on May 4, that it would block this move -- wanting to protect domestic rivals. "India does not encourage dumping or recycling of hazardous materials," NN Kaul, a spokesman for the telecom ministry told Reuters.
The good news for Apple in India is that despite its mere 2% market share, demand for cheaper older-generation devices such as the iPhone 5S contributed to 56% growth in Apple's revenues there.
3. Innovation Desert
Tim Cook has been Apple's CEO since August 2011. To his credit, Cook has squeezed additional sales from the iPhone that his predecessor introduced in 2007.
Since then, he presided over the introduction of a new product -- the Apple Watch. It's a an expensive device that does not work very well according to reviews.
A Gizmodo review from a writer who bought and used one for a year concludes, “I stopped wearing it two months ago, and I’m not sure if I’ll ever wear it again. That’s because it doesn’t really do anything that anyone needs, and even when it does, it doesn’t always work like it’s supposed to.”
But people have bought millions of them -- the Journal reported that Apple Watch revenues were estimated at $6 billion in the product's first year on the market.
That simply does not amount to enough additional revenue to make up for the declining sales of the iPhone and the iPad.
4. Loss of Wall Street Support
Carl Icahn is a short-term trader who calls himself an activist. A few years ago, Icahn predicted that Apple stock would hit $200 by the end of 2015 -- he was off by 47%.
On April 28, Icahn announced that he had sold his Apple shares -- netting a $2 billion profit on the trade, according to CNBC.
In May 2015, Icahn said he had a $240 per share price target on Apple when it traded around $130 per share. In September 2015, Icahn told CNBC he considered buying more Apple shares -- saying it looked cheap.
To be fair, analysts are still bullish on Apple. 37 analysts surveyed by Thomson Reuters rate Apple a 1.9 (1 = strong buy and 5 = sell) with a median price target of $120.
5. Weak CEO
Cook's weakness as CEO comes in his apparent belief that putting on a happy face in public will make people believe.
On May 2, Cook appeared on CNBC's Mad Money. As Bloomberg wrote, Cook was trying to "soothe investors. It's unfair to compare Apple's numbers to the 2014 debut of the iPhone 6, which was a tough act to follow, Cook said. He added: Everything is great. Look at how much money we're making. The smartphone market has plenty of room to run. Customers love us so much."
Is Cook delusional? In January 2016, Bernstein analyst Toni Sacconaghi asked Cook whether iPhone shipments would fall 15% to 20% in the first quarter.
"We don't think that they'll decline to the levels that you're talking about," Cook said.
Cook was wrong -- Apple sold "16% fewer iPhones in the March quarter than it did in the period a year earlier," according to Bloomberg.
It may have worked for Steve Jobs -- since he had a track record of innovation.
But Cook has had nearly five years to show that Apple is still Apple.
It is not.
