Financial services firm BGC Partners on Monday downgraded its rating on Apple (AAPL) stock to sell from hold and slashed its price target to 85 from 110.
The report from BGC analyst Colin Gillis comes a day before Apple is scheduled to report fiscal third-quarter earnings. Wall Street expects Apple to post its second consecutive quarter of declining sales and earnings on a year-over-year basis amid soft iPhone sales.
Apple stock fell 1.3% to 97.34 on the stock market today.
"Apple has peaked under the leadership of CEO Tim Cook," Gillis said in his research report.
Apple reached its high point under Cook on April 28, 2015, when its stock hit its all-time peak of 134.54. At the time, Apple was riding an unprecedented upgrade cycle for its bigger-screen iPhone 6 handsets.
IBD'S TAKE: Apple stock has an IBD Relative Price Strength Rating of 17, meaning it's been outperformed by 83% of other companies on the stock market over the past 12 months. For more information on Apple, visit the IBD Stock Checkup.
Under Cook, Apple has been cautious about entering new product categories. The Apple Watch, launched in April 2015, is the No. 1 smartwatch, but overall sales have disappointed. Apple Music, which debuted in June 2015, has grown rapidly to 15 million subscribers, but it's seen as a low-margin business.
Gillis cited hurdles for Apple's future. They include slowing iPhone sales, lackluster software products, and lagging efforts in fast-growth areas like streaming video, cloud computing, connected home, artificial intelligence and virtual reality.
"When we ask ourselves 'Do we see Apple gaining or losing its next $100 billion of value?', the answer is losing," Gillis said. "We would rather be too early on this call than too late."
Cook missed his chance to diversify while the smartphone business was booming, he said.
"With the unfolding dynamic that is the maturation of the smartphone market, Apple has had ample time and resources to build new revenue streams and categories, and the only new category that been delivered by current management in their five years is the watch that still begs for a raison d'etre," Gillis said.
Apple's $200 Billion In Cash 'Languishing'
Cook and his team have devoted a lot of capital to stock buybacks with questionable results.
"The stock has lost approximately $235 billion in value while repurchasing $117 billion in shares," Gillis said. "The share repurchases over the last six quarters have all occurred at higher average prices than where the stock is currently trading."
Apple has over $200 billion in overseas cash, which is "languishing on its balance sheet." It could have used that cash to buy ARM Holdings (ARMH), which SoftBank just acquired for $32 billion.
"Apple acquiring ARM could make so much sense," Gillis said. "It's a high-margin business with future growth, plus there is a national security interest benefit. It positions Apple for the growing IoT (Internet of Things) market. So disappointing! Perhaps management was focused on how to remove headphone jacks."
The biggest expected change in the upcoming iPhone 7 is the elimination of the analog audio jack.
Gillis also noted that Apple's U.S. cash has been depleted to $24 billion and its debt has increased to $72 billion.
