As we head towards 2022, should “In Apple We Trust’ go with the words ‘In God We Trust” on US currency after the iPhone giant’s performance in the last 8 trading sessions that has seen it a week’s solid gain away from becoming the world’s first $US3 trillion company?
That performance raises the question, are Apple shares (seen by investors at the moment), as safe as the US government?
There has been a long list of once iconic companies that came to represent their times in the past century. Ford Motor, General Motors, IT&T, General Electric, Exxon Mobile (then Esso and then Exxon), IBM, Facebook (now Meta), Alphabet, Amazon and Microsoft.
The latter trio are still there – Microsoft is the second most valuable company at more than $US2.5 trillion, Amazon worth nearly $US1.8 trillion and Alphabet (the parent of Google) is worth $US1.96 trillion.
It is a dangerous moment for markets when just one stock like Apple seemingly has the weight of investor expectations riding on it.
Tuesday last week when Omicron loomed large over the global economy and stockmarkets and Fed chair, Jay Powell switched from inflation being a ’transitory’ concern to being a headache, Wall Street fell out of bed but Apple shares jumped a sharp 3.2% to a then record close of $US165.30 which pushed its market value above a record $US2.7 trillion ($A3.8 trillion).
Wednesday of this week saw Apple shares spike another 2.3% to a record $US175.08 on a lacklustre day’s trading on Wall Street to take its market value above $US2.87 trillion – yet another record.
Thursday the shares lost 0.3% which still outperformed the wider market, especially the Nasdaq where weaknesses in other big techs dragged that index down 1.7% on the day.
In the past month, Apple shares have risen more than 18% – a solid full year gain for most stocks of its size in the S&P 500, the world’s major market measure which is up just 1.17% in the same month.
The last month’s spurt has pushed Apple shares up nearly 32% year to date, ahead of the S&P 500 with a 25.1% gain and the Nasdaq at just over 22%.
Nasdaq, the major tech stock market measure is up a mere 1.05% and most of that has come this week as investors have shaken off their Omicron-driven fears for big tech stock and chased them higher – but Apple is well ahead.
The rise suggests that investors see Apple as a ’safe haven’ in times of stress because the share prices of rival megatechs have not risen with Apple shares in the past month – Microsoft shares are up just 1.26% – Netflix shares dipped 2.9%, Amazon shares are up only 1.2%% and those of Alphabet have gained 1.4% while shares in Meta (Facebook)are down 0.9%.
US bonds are the traditional global ‘safe haven’ (gold has been relegated to the also ran list for more than a year) with investors piling into them at times of stress – as they have been doing since last Friday when the new Covid variant made its global debut on worry lists.
10-year Bond yields fell November 29 to 1.43% – and recovered to 1.49% on Thursday. The yield was 1.56% at the end of October and over 1.70% in March.
The rise in the Apple share price suggests that US investors at least see the iPhone giant as good a credit risk as the US government’s securities. Apple is a massive consumer-facing stock with its plethora of techie wannabe products and services.
It is very unlike its major rival in Amazon which, while anchored in the consumer space with its huge e-store operations in the US and globally, also has a massive cloud computing business, smaller bricks and mortar retailing, a growing advertising business and interest in things like electric vehicles and self-driving cars.
Apple though has a range of consumer products valued by consumers the world over and 750 million subscribers to its various services and rising.
Apple shares face another test on Friday with what’s expected to be another weak Consumer price inflation figure for November and then the final Federal Reserve meeting of the year next week.
For the company’s biggest shareholder, Warren Buffett and his Berkshire Hathaway investment group, the recent surge has lifted its year to date rise to more than 22% and a near record market value of $US638 billion.
After a decades-long run as one of the world’s best-performing stocks, Apple is on the verge of reaching $US3 trillion ($4.2 trillion) in market value. That’s bigger than the entire German equity market. Or the UK economy.
Now the iPhone maker needs to rise just another 5% to become the first company to reach a $US3 trillion valuation (more than the value of the UK economy), less than four years after it first topped $US1 trillion. In late 2000, amid the remains of the tech and net boom and bust, Apple was valued at just $4.5 billion.
Seven years it changed life as we know it when it launched the iPhone and, as they say in the books, ‘the rest is history’.
But to balance the immediate health and future direction on just one, admittedly very large company is precarious to say the least.
A weak quarterly report next February (ie with weaker than expected sales growth) could very well trigger a rapid rerating of the stock and the market.
