APPLE Inc – What Next?

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APPLE, Daily

By: Stuart Cowell

Apple Inc. once again became the largest company in the world by market capitalization on Friday (overtaking ARAMCO), and is on its way to a $2 trillion valuation. The Apple share price closed at a new high at the close of business on Friday. The stock rose a very significant 10.47% ($40.00) to close at $425.05. The rise was on the back of substantial quarterly Earnings that were reported after the market closed on Thursday, which saw revenue close to $60 billion, ($7.6 billion more than expected) profit top $11 billion and Earnings per Share of $2.58 compared with expectations of $2.09, to register a 23% beat. The rampaging share price on Friday took the iPhone maker’s market cap to $1.84 trillion, a rise of $171 billion on the day¹.

The company also announced another stock split (the fifth in its short history), so the $400+ share price will have a limited shelf-life. This time it is on a 4-for-1 basis, (last time in 2014 it was a colossal 7-for-1) and before that in 1987, 2000, and 2005, they performed a 2-for-1 dilution of the shares. As a point of note, one share that was owned before Apple’s first split in 1987 would result in 224 shares later this month once the split happens. As Warren Buffet (a late investor in APPLE) is often quoted as saying, “Our favorite holding period is forever”.

Current shareholders will receive 3 shares for every one they own from August 24 with the additional shares being trade-able from Monday August 31, following the closing price on Friday 28.² Nothing changes with regards the fundamentals of the company, it just makes the share price “appeal to a broader base of investors,” as APPLE put it on Thursday. Psychologically, we tend to buy more of something that is suddenly cheaper, at least that is the theory.

Apple remains a firm favourite with many investors, and 13 Analysts all upgraded or reiterated their outlook, post earnings. Wedbush had the highest target at $475, and the median of the 13 was $415, as Friday’s close was far from anticipated. Everyone has a view about APPLE. September is usually the month of the new product announcement and this year will be no different, with news slipping that the new iPhone WILL deliver in October with high expectations of a move into 5G.

Only four years ago, during the summer of 2016, the Apple share price triple bottomed and traded as low as $90.20 a share, following the disappointment of the iPhone 6s, Apple TV and iPad Pro which had all been launched the previous September. 2016 saw the successful iPhone 7 launch, the move into services and the revamped Watch.

To conclude with another quote from APPLE shareholder and legendary investor Warren Buffet, “the stock market is designed to transfer money from the active to the patient”. Today, the stock has opened up another 4% at $442.00, more than double (100%) the March low at $212.00.

¹https://www.fool.com/investing/2020/08/02/is-apple-stock-a-buy-ahead-of-its-stock-split.aspx

²https://markets.businessinsider.com/news/stocks/apple-stock-split-price-what-that-means-how-many-shares-2020-7-1029455711#


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