Jonathon Trugman

Jonathon Trugman

Business

Don’t bite at this Apple

If the tens of millions of US iPhone lovers heed Warren Buffett’s advice and only invest in companies and products they understand, millions of people are going to be tempted to buy Apple stock when the newest iPhone gadgets debut next week.

Well . . . don’t.

The stock market doesn’t care about your lovely new iPhone — no matter how cool it is.

The last time Apple rolled out a new smartphone, the iPhone 5, it was Sept. 21, 2012, and shares in the Cupertino, Calif., company sat at $700.10. Seven weeks later, on Nov. 8, they were at $537.75, a drop of 23.2 percent.

The previous year, on Oct. 14, 2011, the day Apple released the iPhone 4S, shares sat at $422. Over the next six weeks, they had tumbled 13.8 percent.

In both cases, Apple shares enjoyed a robust run-up in advance of the launches. And the same thing has happened this year.

On April 27, Apple shares sat at $393.78, before jumping more than 23 percent through Friday.

In other words, you’ve missed the boat. But don’t worry, after the expected sell-off over the next several weeks, Apple is sure to rise again.

The key to Apple’s outstanding sales revenue, earnings and hence its long-term stock performance — it’s up 188 percent over the last five years — is its revenues and gross margins.

Right now, only Apple CEO Tim Cook and his C-Suite colleagues know the gross margins of the soon-to-be-released gadgets.

If the margins are much lower going forward, the phones, even if they are just as fabulous for users as the iPhone 5 is, will nonetheless make losers out of shareholders.

We don’t know yet.

If Cook can offer something new in the midpriced smartphone market without cannibalizing Apple’s high end, analysts think investors would probably cheer.

But neither Main Street nor Wall Street knows yet.

So don’t buy Apple shares now. Wait for the likely sell-off, and then pounce.

But don’t be too upset. In three weeks, you can buy the latest gadget and be the coolest person on your block — and you’ll feel a lot better knowing that an impulsive stock purchase isn’t heading south.