People are usually standing outside the Apple store on Fifth Avenue when New York City enters Phase 2 from reopening following restrictions imposed on the conversion of the coronavirus pandemic on June 30, 2020.
Noam Galai | Getty Images
Apple is one of the big tech engines pulling the market higher, but it is unique in that investors consider it an asset class for themselves.
That’s one reason why the big tech clock on Wednesday became the first US company to have a market cap of $ 2 trillion, just two years after the first crossing of the $ 1 trillion mark on August 2, 2018. Microsoft, Amazon and Alphabet also have market cap above $ 1 trillion.
Apple has been on a downward spiral since reporting stronger-than-expected revenue July 30 and a 4-1 stock split, gaining about 21% since then. As is often the case, the stock has skeptics, who said the stock split should not ride higher because investors have access to cheaper fractional shares.
“People see security in that name, as crazy as it sounds,” said Matt Maley, equity strategist with Miller Tabak. “As the market hits new heights, you would think people would see what the next big winner is. [The market’s] gone so far, where should people be? They must be in this name. It has a lot of cash. You can say that you provide a certain amount of security and income when the market is constantly rising and being valued. “
Apple had $ 193.8 billion in cash at the end of its fiscal third quarter on June 30th. In an age of ultra-low interest rates and no returns in Treasurys, investors are also attracted to companies that pay dividends. Apple paid out its quarterly dividend of $ 0.82 per share last week and will split its stake on August 31st.
Safety, stay at home
Maley said corporate earnings did not grow that much, but the belief by investors that Apple will do well in 5G technology has benefited from the stock. He compared the post-crisis trade from 2009 to now, saying that Apple was seen as more of a growth stock than just a safe haven now.
In 2009, “when people still did not trust the market, they still said, hey, ‘I have five Apple products in my house'” and they traded on it. “Well, it’s ‘geez, the market is coming for itself. I want safety.’ And they’re looking at Apple. “
Apple has benefited greatly from staying at home stores, following the closure of coronavirus America, but also because people are spending more on their laptops and home office devices. They also spend on home business because the pandemic is still affecting America. Apple’s revenue grew 11% in the third quarter.
The stock also surpassed Wall Street analysts’ forecasts, hitting the average target of $ 427.87 by $ 40 so far.
“It has always been a fan favorite among traders, in addition to long-term institutions and investors,” said Scott Redler, chief strategic officer at T3Live.com. “It was a safe haven during the pandemic, and it has also been an area for growth.” He said investors now see benefits in not only the distribution of the stock, but the dividend and the fact that the stock seems to be set.
“It’s a proprietary class of its own. It’s almost like Apple’s own market. Apple has been leading the market quite a bit since the declines in March,” said Redler. “The next thing will be how it reacts after it splits.” Apple’s stock split is the company’s fifth. It previously split on a 7-1 basis in 2014, and a 2-1 basis in 2005, 2000, and 1987.
Redler, who follows technical techniques in the short term, said Apple’s chart looks particularly strong since its announcement of earnings and stock splits. “It’s always been a go-to name and it’s always rewarding. If Apple’s above the 21st day [moving average], the trend is strong, and it’s basically above the 21st day since the lows of March, “said Redler.
But risk ahead?
But like many tech names, Apple is facing new problems, including questions about its supply chain as tensions grow between the US and China. It also has a strong market presence in China for its products.
“I think Apple is unusually vulnerable,” said Roger McNamee of Elevation Partners. “I’ve been a big fan of the front for decades. I recently sold a significant part of my position because I feel that external factors, things outside [CEO] Tim Cook’s inspection will now determine the next 12 to 18 months for her supplies. “
He said China is a risk to Apple, and there are other issues that could affect it, including disputes over the App store. McNamee said Apple is less concerned about the government’s anti-trust tests than other big tech names.
However, Redler said investors like the Apple stock because their products have become embedded in the way they live. “Everyone’s life has revolved around their iPhone,” he said.
.
