Kass: Apple's Core Is Weak

Back in September 2012, I outlined my bear case for Apple (AAPL). At the time, the shares had eclipsed $700. To say it mildly, my view was in the minority and was the subject of a lot of criticism and numerous Bronx cheers.

Within eight months, the share price dropped from $700 to under $400.

Since second quarter 2013, I have traded Apple both on the long and short side. I have not had a strong view throughout most of this year, but given the recent share price climb (back to the levels last seen in September 2012) and in light of this week's product launches, I do now have an opinion on the shares.

This week I have taken a short position in Apple, a maturing company whose profit prospects going forward are less attractive than in the past and whose valuation is inflated relative to other hardware companies.

My comments this morning will be focused on the iPhone, which is the dominant sales and profit driver for Apple. (I don't believe that Apple Pay or the iWatch will move the company's needle.)

Let me start by stating that I approach my analysis of Apple as a generalist, not as an industry specialist immersed in the reams of data and depth of issues.

Let me also make it clear that I expect Apple to underperform the markets, but I don't expect Apple's shares to drop from $100 to $55, which would be similar to its decline from September 2012 to May 2013.

I am simply of the view that Apple's shares are overpriced within the context of an expensive U.S. stock market.

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