Apple had been one of the stocks that really suffered during the last major market selloff. It has come back a long way since, but seems poised to move up even more now.
Apple stock took it on the chin more than most during the broad selloff that the fourth quarter of 2018 brought, going from $232.07 on October 3, the same day that the market peaked, all the way down to $142.19 when things stopped falling on January 3.
Apple’s fall was considerably bigger than the market, and they also took a little longer to turn things around. Apple has been seen as particularly prone to the things that had been dragging the market down, particularly their falling sales in China. Apple’s size and exposure to the Chinese market made its results particularly noteworthy for those who were looking to get a view of how tech stocks are faring, and during their selloff, they were not seen to be faring all that well.
When the outlook started to improve in China, as hopes for a trade deal built, the punishment that was delivered to Apple by way of their dropping $90 off their stock price started to turn, and while they were prone to suffering more if things were going bad, they also stood to benefit from the hope for better times.
Since January 3, Apple is now up 37%, and on Thursday, they regained their spot as the largest stock in the United States by market capitalization, taking over from their rival Microsoft. Apple is now worth $924.3 billion at Thursday’s close, thanks to their adding almost $7 a share on Thursday, and leaving Microsoft in second place now at $918.9 billion.
This part isn’t really that significant, being number one instead of number two, although it does show us that Apple is not a stock that is struggling right now and has a lot of momentum behind it, particularly over the last 2 weeks where it has gained over $22 per share, a 13% increase, while the overall market has been fairly flat.
There is more going on with Apple than just the general optimism about a trade deal that is helping push stocks further forward as of late. Things aren’t going all that well on that front actually and while the overall expectation remains positive, and some progress is being made, this is taking longer than many had hoped and will by no means be an easy deal to get hammered out to the satisfaction of both sides.
Unlike the broader market, which has recaptured all of its losses since October, Apple still has quite a way to go to get there, and has only gotten about 60% of it back in spite of it being up the 37%. Of the $90 a share loss it suffered, there is still $37 a share to go, which could mean more upside if this move can continue.
Apple Set To Roll Out a New Streaming Service This Fall
Apple does have something new in store for the market, and plans to announce a new streaming service, which has excited some analysts and had some raising their outlook for the stock. Laura Martin of Needham has upgraded it to a strong buy ahead of next week’s announcement, and now has a price target to $225, up from her previous target of $180, which has been well passed now.
This would have Apple moving up a further $30 per share and within $7 of their all-time high. Apple could certainly stand to add more revenue from this to make up for declining iPhone sales and also deepen their subscriber base, which content streaming is perfect for.
Many still see Apple as more of a product company rather than an ecosystem company, even though Apple is certainly a little of both, but it’s hard to argue that the product side isn’t the more important one given that how much of its revenue comes from hardware sales. Apple is certainly looking to become more of a service provider though, and this move is designed to further bolster these efforts.
Martin sees Apple as being able to successfully tap into the services market more, and Apple does have some real potential here with its almost a billion users in what is termed their ecosystem. The goal here is to both further take advantage and monetize all those people who own and use Apple’s products, as well as retaining the current user database more and also attract new users.
Getting a strong buy rating from an analyst can be a good sign, but this is even more meaningful when it comes from an advisory service that doesn’t hand out that many of these ratings. While a strong buy can sometimes only mean that it’s probably not time to sell, only 8% of the stocks that Needham follows earn a strong buy rating from them, and Apple is now on this more exclusive list.
Apple Seeks to Beat the Content Service Providers at their Own Game
Apple does need to compete with some pretty stiff competition on the content side of things, which include Facebook, Google, Netflix, and Amazon, so it’s not that building up this side of the business will be a walk in the park. Apple does have a real advantage among its own users though, and Martin bases her upgrade primarily upon her belief that Apple can indeed compete well among their more established peers in this arena.
While Apple’s venturing into this new streaming service is a key moment in their expansion of the services side of their business, Apple has indicated this this is just the start. They are looking to aggressively pursue acquisitions to add to their content library, the area that they are starting out so far behind compared to the more established providers.
Apple does have the money and the desire to do this though, and the user base to roll it out to, so while they have a lot of catching up to do, it does look like a good bet that they will at least be able to narrow the gap over the next couple of years.
As big and as successful as Apple has become, as their regaining their position as the biggest company in the United States by market capitalization testifies to, as well as the breadth of their reach with so many people using their products every day, they still realize how important it is for them to continue to evolve and not just rest on their laurels. For those in Apple stock for the longer haul, while this stock does have its concerns, overall things are looking pretty good for them lately.