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- Apple's stock valuation is unreasonable, reflecting how it's a "shrinking company," Bill Miller IV said.
- "I think somebody needs to tell the market that Apple is a shrinking company trading at a growth company multiple," the chairman of Miller Value Partners said.
- Apple stock has taken a hit in recent weeks thanks to a partial ban of iPhones by China.
Apple's current stock-market valuation reflects unrealistic growth expectations, according to the chairman of Miller Value Partners.
The makes of iPhones and iPads is the most valued company in the world, with a current market capitalization of around $2.73 trillion. The measure briefly surpassed $3 trillion earlier this year, the only stock to ever reach that milestone.
Given the sheer size of the tech giant's revenue base, it's difficult for it to deliver growth rates that meet investor aspirations captured by the stock price, the fund manager suggested. Apple and other Big Tech shares are now trading at "very high" earnings multiples and as a result, a handful of such names account for as much as a third of the entire market capitalization, he added.
"Somebody needs to tell the market that Apple is a shrinking company trading at a growth company multiple," Bill Miller IV, the son of veteran fund manager Bill Miller, said in a CNBC interview Wednesday.
"If you just think about what it takes for Apple to grow from a $395 billion revenue base, the economy grew at 6% in Q2. Let's take 6% of $395 billion, that's $24 billion in revenue. That's McDonald's revenue, that's Charles Schwab's revenue. It took decades to create these companies," he added.
"So to actually grow from this base is a very hard thing to do, yet it trades at 30x earnings which implies a high expectation for continued growth," Miller IV continued.
Big Tech stocks have surged this year, fueled by investor excitement over the transformational business potential of artificial intelligence. The phenomenon has seen mega-cap shares like Apple, Microsoft, Amazon, Nvidia, and Alphabet power a rally in the S&P 500 this year even in the face of widespread recession fears.
Apple's stock has taken a beating in recent weeks after China banned its government officials from using iPhones at work, amid simmering Washington-Beijing tensions. The company lost nearly $200 billion in market cap in just two days on fears of a wider China crackdown.
"There's a real limit to what these companies can do. If you think about Apple growing, such a massively scalable or has been so scalable in the past, if you think about what it would require for them to grow is very, very challenging and yes, you can cut stuff out, but they're stuck here," Miller IV added.
Still, there are some market experts who remain bullish on Apple. Wedbush's Dan Ives said he expects a 20% jump for the stock, thanks to the launch of its new iPhone 15.