Apple’s trillion-dollar market cap could be at risk as the share price continues to be under pressure on concerns over the economic fallout of the spreading COVID-19 coronavirus pandemic.
Although it feels longer than it’s actually been, it was just a few weeks ago that we reported that shares of Apple Inc. rose $6.65, or 2.09%, to $324.34, to hit a new all-time closing high. During trading on that day, January 29, 2020, Apple also reached a new all-time intraday high of $327.85 and the company’s market value hit $1.422 trillion.
Ryan Vlastelica for Bloomberg:
Technology stocks have been among the hardest hit in the market sell-off, with investors fretting over the impact to both demand and supply chains. The rout continued on Thursday after an address from President Donald Trump failed to assuage concerns about the government’s response to the outbreak. Shares of Apple fell as much as 9.1% while Microsoft dropped as much as 7.8% before paring their declines.
With the stocks down more than 20% from their February peaks, investors in Apple and Microsoft have seen their market value fall to about $1.1 trillion for each, down from more than $1.4 trillion just a few weeks ago.
MacDailyNews Note: The sell-off has already removed two members from the trillion-dollar club: Amazon currently has a market cap around $858 billion and Google-parent Alphabet’s value is below $800 billion.
So what.
The issue to focus on should be the level of cash Apple is holding. How many companied have the cash to last a year or two in an economic crisis? Apple may well need to lower dividend, or end them for quarters with no profits, but they will have the ability to operate at their normal level, especially in the areas of R&D and new designs.
Very few companies have the financial power that Apple has in terms of lasting through a economic storm. Apple will also have a lead position in picking faltering, but desirable companies art a very good price.
I’m in no position to state categorically that AAPL is healthy, or not, but the situation is far from historical rosy-ness….
Apple’s debt-to-equity ratio jumped from 50% in 2016 to 112% as of 2019. Apple is borrowing A LOT and it’s largely because of stock buybacks…which have nothing to do with innovation, or future progress. Instead, they award large share holders, as in institutional ownerships high share count “individuals” like W Buffett and AAPL executives. More concerning, it’s a method to make EPS higher without corresponding profit…to appease Wall St. Apple’s P/E is also signals a similar reason to be concerned/curiously aware. It’s nearly double historical levels.
Add the effect of the V on profit and there are some real concerns going forward. Apple remains a market stalwart, but it’s not the Apple of 2008 when there was absolutely zero debt affecting shareholder’s equity. Per 2019, the debt is greater than shareholder’s equity…greater than 1 to 1.
Back in 2001, when there was a market bump, I will never forget Steve stating , “we are going to innovate ourselves out” of this market drop. Apple had no debt and a relatively small amount in the bank (3 billion). Now the pockets are deeper, but Apple is way more leveraged…comparing to its own history, but also to current tech competitors. I assume Apple could still innovate our of this situation, but it’s a task requiring huge changes and with a mountain a debt, it’s much more complicated.
Apple has a staggering level of debt.
no they don’t.
Somebody call 9-1-1!
Apple should eliminate buybacks, they have not helped and at same time raise the dividend to 1 dollar a share. Long Apple…
Apple easily can stop all buy backs and dividends (which is what Steve Jobs ling believed)… $ should be going into building as Steve said, “the whole widget”… idk how patents affect their ability to create a OLED/Micro-LED facility, but controlling their supply chain in house will allow them to innovate… but all of that costs $.
this MDN take is meaningless… in the sense that almost all companies have taken a hit the last 3 weeks.
they’ll be fine… this winter or early 2021 will hopefully mark the start of the next Bull Market