Apple Stock: Rocky Recovery In The Fourth Quarter
We are roughly at the midpoint of the fourth quarter of 2020.
From October 1 to November 15, Apple stock was up about 3%, trailing the performance of the S&P 500 and the FAAMG ex-Apple group by about four percentage points. See chart below.
The recovery from a turbulent month of September, in which Apple lost 10% in market value, has been rocky. Today, I revisit some of the key drivers that have sent Apple’s share price up and down so far in the fourth quarter.
Bang and fizzle
It all started with the introduction of the iPhone 12, which was finally unveiled on October 13. Apple scheduled the event on October 6.
I believe that the relief in investor anxiety around the timing of the new smartphone launch was a key factor in pushing Apple’s share price higher by about 8% in the few days leading up to the iPhone 12 event.
However, October 12 marked a peak for the stock in the fourth quarter, which then proceeded to drop about 14% in the following three to four weeks. I believe that shares fell victim to “sell the news” pressures, suggesting that the early October mini rally did not have much “whoomph”.
To be fair, not all the late-October bearish pressures seem to have been company-specific. In anticipation for the early November US Presidential election, assets in general (broad stocks, bonds, gold, etc.) sold off in a risk-off move by the markets.
Apple reported fiscal fourth quarter earnings on October 30. However, the market did not seem too enthusiastic about the results, which included a rare 20%-plus decline in iPhone revenues. On November 2, Apple stock reached its fourth quarter bottom.
All it took was less than one week, however, for Apple shares to return to positive territory in the quarter. It is clear that the liftoff was driven by a collective post-election “sigh of relief”, which helped to support not only Apple shares, but the stock market as a whole.
In my opinion, Apple also benefited from the lack of a “blue wave” in the US election, which could mean a Republican-dominated Senate. A split government will probably get in the way of Washington being effective at coming after Big Tech for antitrust matters or raising corporate taxes.
“One more thing”
Lastly, on November 10, Apple announced a new lineup of Mac devices.
I believe the new ARM-based architecture will be a positive for the company and, maybe, for the stock in the long term. But I did not think that the new devices would be enough to spark a new wave of bullishness.
Interestingly, Apple moved up 3% in the couple of days after the Mac announcement, while the broad market moved largely sideways.
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