The Risks Associated With Owning Apple Right Now

As Apple Inc. (NASDAQ: AAPL) prepares itself for the launch of the Apple Watch, some analysts are concerned that the company's mainstay, the iPhone business, may start to decelerate. BGC Financial's Colin Gillis was on CNBC Monday to discuss the major risks associated with Apple.

The Tricky Thing

"Here's the key with Apple, right? It's got a tremendous franchise with the iPhone, but it's highly dependent on both the revenue and the high margin that they receive from these smartphone users that they are selling. And that market is slowing down," Gillis said.

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"And that dependency – it's a great company; they have a tremendous ability to generate cash – but will they be able to sustain that given that the dependency on this hardware unit in a market where ASPs are declining and unit growth is declining? That's going to be a very tricky thing."

He continued, "If you look at Apple's market cap [...] it's twice the size of the number two company. No company that has had market cap exceed half a trillion dollars has ever been able to sustain that over time."

Risk Of Slower Unit Growth

Gillis was asked if Apple's ASP could go even higher. He replied, "They can go up more, but they run the risk of running behind the broader market unit growth.

"That means you are serving the high end in the marketplace and that's fine, right? But, if competitors are able to close the functionality gap while the price gap widens, you are going to see slower unit growth and that's the risk that happens, particularly after this current upgrade cycle where people have a phone, you may see the longevity of those phones last longer than two years," Gillis concluded.