CNBC this morning had an interview with Saxo Bank’s Peter Garnry who suggests investors long Samsung and short Apple (AAPL). The equity strategist cited what he sees as Apple’s misinterpretation of iPhone demand in China, stressing that local Chinese device makers are offering products that are 40% cheaper than Cupertino’s but “on-par” in terms of quality.
“We are going to see more commoditization of this industry where consumers will be more sensitive to price and not features and the premium status which has been the key features for the iPhone so far,” Garnry told CNBC, adding that if one takes “a look at the challenges in Asia, it’s quite clear that Apple misinterpreted the demand and there is excess inventories now of iPhones.”
Garnry believes Apple will continue getting squeezed in China, unless it lowers its price point.
“I think this whole commoditization plays into the hands of Samsung because they already compete in commoditized markets across semiconductor, TV panel…and they are very very good at this,” the strategist said, warning that the next couple of quarters will be all about weakness for Apple shares.
Facebook Is Undervalued
The analyst also said he believes Facebook (FB) stock is undervalued. Based on this year’s current estimates of $1.64, FB trades with a P/E over 70x. This compares with a T-12 EPS of $8.98 and 10.7x P/E ratio for Apple. Garnry said that investors who think FB is expensive are “miscalculating the compound of growth”.
“You cannot find a company on this planet, of this size, that are growing with these growth rates and the profit margins are phenomenal and could easily expand if they cut back a little bit on capex or R&D,” Garnry said.
Shares of Apple dropped 0.75% to $96.41 in pre-market trading. Facebook was down 0.52% to $114.