Famed investor Jim Cramer reveals he is worried about Apple, a stock that he has owned for more than a decade.
Cramer is worried that Apple is losing easy revenue through regulatory tussles, geopolitical pressure, and OpenAI’s latest move.
Apple in April lost its crown as the most valuable company in the world, with its market capitalisation declining beneath Microsoft.
Nvidia also raced past the iPhone maker’s valuation as Apple is now trading as the third most valuable company with a $3 trillion valuation.
In its Q2 results, the company’s earnings beat estimates, though iPhone sales plunged 10%.
On Thursday, Apple shares were down 0.13%, and the stock is down 17% in the year so far.
Losing easy money
Cramer points out that the first big problem for Apple is losing $20 billion from Google due to the antitrust case against Google’s parent company, Alphabet.
Alphabet reportedly pays Apple $20 billion annually to make sure Google is the default search engine on iPhone and iPad.
In the US antitrust case against Google for its monopoly in the search engine market.
While Cramer said Apple could make the money by other methods, like charging other search platforms, the “Alphabet deal was $1 a share in easy profits that could go away”, he said.
Legal struggles
Apple’s legal case with Fortnite maker Epic Games is another area of concern for Cramer.
Apple’s battle with Epic Games over app store payments could cause another 30-cent departure in the company’s earnings per share, Cramer noted.
Recently, a federal judge slammed Apple over non-compliance with opening up its app store to alternative payment methods.
The judge had ruled that the Cupertino-based company stop charging commissions on payments made outside Apple’s payment system.
Apple charges a 30% commission on payments made on its App Store.
The Fortnite game is now available on the Apple store, five years after Apple kicked it out.
Trump factor
Apple’s plans to diversify its production from China to India is also facing a potential roadblock with US President Donald Trump wanting more.
Trump recently criticised Apple’s decision to build in India.
Trump wants Apple to manufacture in the US, which would cause a 13 times increase in manufacturing costs.
The move would reduce Apple’s margins from its flagship product from $450 to just $60 if prices are not raised.
Cramer flags this also as a problem, as making iPhones in the US could erode “one of the great American triumphs to rival smartphone maker Samsung, a Korean company”, he said.
He says that without Trump’s blessing lot of havoc would happen against Apple.
The host of CNBC’s Mad Money also said the US regulators are looking into Apple’s recent deal with Alibaba.
Cramer said this partnership was the best source of new business for Apple in China.
He adds that these deals, which were once seen as an American strength, are now viewed as US weakness and a boost for China.
OpenAI threat
OpenAI’s recent acquisition of a startup founded by former Apple design chief is also a concern for Cramer.
OpenAI’s bid to make AI-enabled hardware is a question mark over Apple, according to Kramer.
He adds that while he is not worried about long-term prospects, he says he won’t buy anymore stock in the current juncture.
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