As of today, Apple is no longer the world’s most valuable company. Saudi Arabian oil company Aramco has now taken over that title. According to Bloomberg, this reversal is because of a surge in oil prices due to current inflation increases.
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Apple’s stock closed this Tuesday with an all-time-high record, reaching $343.99 at the end of trading. As noted by CNBC, big technology companies are performing strongly during the COVID-19 pandemic.
Two Apple suppliers this morning, Lumentum and AMS, are reporting weak revenues ailed by weakening global smartphone sales, particularly hurt by the slowdown within China. The latter of the two, AMS, struggled on an earnings call predicated with a guidance revision, seeing a 58% decline in quarterly profits YoY alongside a dividend suspension.
It didn’t last long, but Apple (AAPL) was again the most valuable publicly traded company in the US today, bringing its peak market cap to nearly $807 billion. The exact figure, $806.6 billion, was $1.2 billion higher than Amazon (AMZN) at the time and about $200 million higher than Microsoft (MSFT).
As Apple rebounds from its first earnings call predicated with a guidance revision in 16 years, many analysts remain skeptical of the company’s ability to regain its trillion-dollar status. Morgan Stanley analyst Katy Huberty, however, offers a different take, via CNBC.
An analyst for Morgan Stanley said today that expectations for Apple’s Q1 2019 earnings are already set so low, that now marks perhaps the most ideal time to invest in the company.
Basically, the “bad news” regarding weak iPhone sales has already seen such a heavy response from the most fickle investors, that whatever Apple announces on Tuesday will most likely not tank the stock any more volatile than usual.
A report from the Wall Street Journal today details how Apple (AAPL) lost $9 billion this past year due to a single “underperforming investment” — itself. The report explains that after the surplus of cash the company had through Trump’s 2017 tax overhaul, Apple bought back AAPL shares at peak prices, essentially overpaying for themselves.
Even though AAPL yesterday saw its best single-day performance in over five years, the ~$10 gains made on the share price pale in comparison to the significant losses the stock saw over the past weeks.
According to a third quarter letter to investors (via CNBC), David Einhorn’s Greenlight Capital has today sold its last bit of Apple shares due to fears of its Chinese relationships in light of recent U.S. tariffs.
Following Bank of America Merrill Lynch yesterday giving six reasons for downgrading AAPL stock, Morgan Stanley has responded today with four reasons it continues to rate the stock a Buy, reports Business Insider.
In a note to clients on Thursday, Morgan Stanley’s Katy Huberty maintained an “Overweight” rating and $155 price target on the stock, arguing that the company will not see a similar stock meltdown to what was experienced after a huge run-up in 2012.
While acknowledging that supply may be catching up with demand, leading to supply chain reports of seemingly weaker sales, Huberty says there are four reasons the stock is likely to climb.
- Gross margins are improving, not deteriorating, as the company heads into the next iPhone cycle.
- There’s low institutional ownership of the stock.
- Apple has a more competitive product line-up and a “stickier” ecosystem against Android.
- There’s a more robust product and services roadmap.
Addressing concerns about the impact the weak Chinese economy may have on Apple, Huberty says that smartphones costing more than $300 each have been increasing their market share, meaning that Apple is well placed to continue to grow its business in the country.
The stock market can often seem an irrational place, and never more so than where AAPL is concerned. The company keeps reporting record sales, has typically out-performed analyst expectations, takes home almost the entire smartphone industry’s profits and has so much cash it scarcely knows what to do with it – yet its share price is falling.
AAPL stock has fallen more than 14% since April, wiping $113B from the company’s market valuation. It dropped 7% in the past month alone. That’s the equivalent of McDonalds vanishing into thin air. What gives?
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Analysis by Above Avalon‘s Neil Cybart suggests that Apple is unlikely to accelerate the pace of its stock buyback program as it is already spending almost all of its available US cash stockpile on share dividends and buybacks.
Out of $155B of cash, only $18B is available in the U.S., with the rest sitting in international subsidiaries unable to be sent back unless repatriation tax is paid […] Apple is essentially taking most, if not all, of its free cash flow from U.S. operations and piling it into share buyback.
Cybart does some number-crunching to suggest that Apple is likely to buy back around $30B worth of stock next year, though acknowledges that new product lines like the Apple Watch make it difficult to forecast future profits with any certainty.
Apple has come under consistent pressure from billionaire shareholder Carl Icahn to increase the pace of its stock buyback program, recently suggesting that an accelerated buyback could see the company achieve a trillion dollar valuation. It was recently estimated that Apple’s cash reserves would have reached $210B without the dividend and stock buyback program started two years ago.
If there’s one thing as certain as the hype when Apple launches a new iPhone, it’s the “Apple is doomed” messages when the new model(s) fail to meet every single analyst prediction, no matter how crazy. Apple could add a matter transporter function to the iPhone 6 and some analyst would be complaining that it only operates on WiFi when they were expecting it to use LTE.
Business Insider pointed to a set of CNN charts which show that, typically, the AAPL stock price is down a month after a new iPhone launch. But any similar dip we might see after the launch of the iPhone 6 is no cause for concern: with the exception of 2013, Apple stock has been climbing since the first iPhone was launched in 2007.
As ever, make your own investment decisions with the aid of professional advice, but there certainly doesn’t appear to be any reason to be spooked if the launch of the new iPhone leads to some investors selling their shares. “Buy on the rumor, sell on the news” is a very common approach.
SEC filings show that Angela Ahrendts had half of her first allocation of AAPL stock withheld on 1st June – the day it vested, and just one month after joining the company – reports ComputerWorld.
According to a filing with the U.S. Securities and Exchange Commission (SEC), Ahrendts received 16,264 shares in Apple stock when it vested June 1 […]
Ahrendts sold 8,331 shares that same day for a pre-tax total of $5,273,523.
The full value of her stock, which is likely to vest (become eligible for sale) over several years, will add up to $78.5M at the current share price. Her total compensation in her final year as CEO of Burberry was $4.4M – though she did also get a clothing allowance of $42,000 and a car allowance of $30,000 (only at a fashion company could you get more to spend on clothes than a car …).
Selling half your stock at the very first opportunity doesn’t seem to send the best of signals a month into the role, but I guess she needs to buy a house out in the Valley and those aren’t exactly cheap right now.
The withholding of the shares came just over a week before a 7-to-1 stock split, on Monday. The stock split should make AAPL shares more attractive to smaller investors, a shift that could make the share price more volatile.
Via Fortune
Update: These shares were withheld for tax purposes by Apple not sold on the open market
Investors seem to have taken heed of analyst ratings in response to the higher-than-predicted earnings Apple reported last week, the share price climbing from $524.75 before the company released its financials to approaching $600 at the time of writing.
Fortune suggests Apple’s results isn’t the only factor at play, with investors perhaps also following Greenlight Capital’s lead in moving out of other tech stock with particularly high price to earnings ratios – the measure of how a share price relates to its earnings. The higher the P/E ratio, the more over-valued it looks according to traditional measures …
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It wasn’t just Apple’s earnings and iPhone sales that took people by surprise yesterday: the company also announced a 7-to-1 stock split.
A stock split is where a company divides one expensive share into two or more cheaper shares. In theory, there’s no benefit to this: it’s just like splitting a $100 bill into two $50 bills. You end up with the same amount of money and the same share of the wealth. But in practice, a lower share price tends to encourage investment, partly because it allows smaller investments and partly because stock splits tend to signal that a share price is likely to continue to increase.
Most stock splits are 2-to-1, sometimes 3-to-1. A 7-to-one split is highly unusual, and in yesterday’s earnings call, Tim Cook explained the reason (via Business Insider).
We are taking this action to make Apple stock more accessible to a larger number of investors. Each shareholder of record at the close of business on June the 2nd, 2014 will receive six additional shares for every outstanding share held on the record day and trading will begin on a split-adjusted basis on June the 9th, 2014.
It’s a move not without risks. By reducing the share price, you make it easier to buy and sell stock, which can make the share price more volatile. But Apple’s board of directors probably figure that small investors are more likely to be those with loyalty to the company rather than the big institutional investors who may take a much more short-term view.
Vox also points out that the lower share price (a $550-ish share today will be split into seven $80-ish shares) would make AAPL eligible for inclusion in the Dow Jones Index. Surprisingly, inclusion in the index is not automatic, based on company size, but is a decision made by a committee – which until now has excluded Apple.
If a company with a very high share price — like Apple before the split — joined the index, it would badly skew the index. This has kept Apple out of the Dow even though as the country’s largest or second-largest company, it clearly deserves to be in.
Again, there’s no practical benefit to being included in the Dow, but it may make the stock attractive to more conservative investors who view the index as a list of ‘safe’ companies.
The disconnect between Apple’s corporate performance and its stock value is something we’ve often commented on in the past. But rarely has the gap between the two been made more visually obvious than in a set of nine bar-charts published by Fortune, comparing Apple with Amazon and Google.
Judging from Merckel’s bar charts, what the market seems to be saying is that it believes Google and Amazon will keep growing indefinitely.
For Apple, it will believe it when it sees the next hit product.
The three ones above give the starkest illustration, while the complete set below give a fuller picture …
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Photo: mashable.com
ComputerWorld noted that Apple’s SEC filing on Friday revealed that Tim Cook lost out on $4M worth of stock as a result of his request to the board in August to revise his compensation arrangements to a deal he felt was fairer to shareholders.
Earlier this year Apple’s board revised Cook’s vesting schedule at his urging. Rather than the two monster stock handouts — which only relied on his continued employment — Cook asked that they be spread out over a 10-year period and tied to the company’s stock performance …
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Less than a week after AAPL stock reached a new high for 2013, and two analysts raised their target price in response to Black Friday sales, the stock has also hit a 52-week high, running at $570 at the point of writing.
Billionaire investor Carl Icahn doubtless played a role, yesterday tweeting that he would be calling for a (non-binding) shareholder vote on an increased buyback program – though for a smaller amount than he had originally urged.
But Fortune yesterday posted a rather interesting chart that may suggest the upward trend will continue …
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Fortune ran a couple of pieces showing what happened to Apple’s stock price after investor Carl Icahn’s tweets, with his initial announcement that he had taken a “large position” in AAPL, followed by news that he’d had a “nice conversation” with Apple CEO Tim Cook – and a subsequent tweet yesterday that he’d “pushed hard for a 150 billion buyback” over a “cordial dinner.”
The total effect? A jump in Apple’s valuation totalling around $23B – or approaching a cool $8B per tweet.
Would be nice to know when he’s about to tweet, eh?
AAPL quickly climbed 6 percent in pre-market trading following Apple’s announcement that it had sold a record 9M iphones in the first weekend, beating most analyst expectations. The last time it hit $500 was six weeks ago, when Carl Icahn announced his increased stake in the company, believed to be in excess of $1.5B.
Analyst forecasts for sales of the new iPhones had ranged wildly from 5M to 10M, but 9M was at the high end of what most were expecting and substantially above the more pessimistic forecasts. Four major financial firms had seemed unimpressed by the announcement on 10th September, downgrading the stock.
Apple’s SEC filing advised investors that it expects to hit the high-end of its earlier Q4 guidance …
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Photo: huffpost.com
Fortune reports that Apple’s stock repurchase scheme – buying back some of its own shares – is proceeding more than three times faster than scheduled.
The company was scheduled to repurchase 10 million shares in Q3. It bought 36 million […] By my calculation, the company spent $16 billion last quarter ($4 billion in cash, $12 billion through the so-called accelerated share repurchase program) to purchase 36 million of its own shares at an average price of just over $444.
If Fortune‘s numbers are correct, then Apple has already spent almost all of the $17B it borrowed back in April. Accelerating the planned repurchase program makes sense if you expect the stock to cost less now than it will later. In other words, if you’re expecting the stock price to climb …
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