Shares of Apple crossed the $1 trillion market capitalization mark on Thursday, causing investors to board the tech giant’s titanic boat party to rejoice, but Canadian businessman and “Shark Tank” television personality Kevin O’Leary shouted down the celebration with a warning of a potential iceberg ahead–in particular, the stock’s high price-to-earnings ratio.
Apple is the first publicly-traded U.S. company to break through the $1 trillion market capitalization barrier, but in addition to O’Leary, some investors worry that its current valuation is a precursor to a significant drop ahead. For O’Leary, a decline could rear its ugly head if Apple is unable to sustain innovation of its popular iPhone.
“People ask, ‘Well, why does it trade at a 17.1 P/E,” said O’Leary on CNBC. “Because basically 68% of the revenue of this company is tied to one product–the iPhone and that includes the services business because one problem, this is the bear case on services, is that you need to continue growing the trojan horse–you have to own an iPhone to buy these services because they haven’t really reached out to other services.”
“You don’t have to innovate bleach. You have a brand, you maintain it in the customer’s head, but you have to innovate the phone every year,” O’Leary added.