Open For Business: Apple Stores Are Back, Stock Recovers
After a year-long winter of store closures driven by the COVID-19 pandemic, all of Apple’s US locations have been reopened. The stock has been off to the races and could exit correction territory soon.
- A long pandemic winter
Apple’s battle with the novel coronavirus started in late winter 2020, when the company shuttered all its stores outside China to combat the spread of the disease. What was meant to be a temporary two-week measure ended up extending beyond the original deadline.
It is hard to tell how much the store closings hurt Apple stock, since the whole market had been tail-spinning around that time. But there is no question that the idea of shutting down stores has been perceived as mildly bearish, at least, by Apple investors.
- A word on Apple Stores
Apple operates about 270 stores in the US. Around one in five of them are in the state of California, home to the Cupertino company. New York, Florida and Texas, combined, account for another one-fifth of the total.
All stores were closed in March 2020. In early July, I estimate that one-third of US locations remained closed, while two-thirds operated limited hours. We now hope that the days of COVID-related disruptions will be a thing of the past.
Warren Buffett on Apple: As Bullish As It Gets
Warren Buffett’s letter to shareholders is crystal clear: he is still very bullish on Apple. Here is how Berkshire Hathaway has increased its ownership of the Cupertino company, despite having trimmed the position recently.
- Buffett’s increasing stake in Apple
The idea that Buffett and his team are more bullish on Apple than many might think was reinforced by the oracle himself.
In his letter to shareholders, Mr. Buffett explained why, despite recently selling Apple, the conglomerate is even more committed to the Cupertino company now than it had previously been. The trick has been accomplished through share repurchases:
“When we finished our purchases in mid-2018, Berkshire’s general account owned 5.2% of Apple. […] Since then, we have […] pocketed $11 billion by selling a small portion of our position. Despite that sale – voila! – Berkshire now owns 5.4% of Apple. That increase was costless to us, coming about because Apple has continuously repurchased its shares, thereby substantially shrinking the number it now has outstanding.”
- As bullish as it gets
Warren Buffett’s letter makes it crystal clear: Berkshire Hathaway is as bullish on Apple as it has been, at least since 2018. The company continues to allocate a sizable chunk of its portfolio to the Cupertino company’s stock, as the chart below depicts:
Apple: Time To Start Talking iPhone 13
Rumors have started to circulate on Apple’s iPhone 13. The Apple Maven reviews the expected features, and how the new device could build upon the 5G super cycle to supercharge the company’s financial results into 2022.
- Same exterior, improved interior
The new devices will probably look just like the iPhone 12 trims, from the outside. In addition to the standard size, the iPhone 13 will likely feature a “mini” model, at a screen size of 5.4 inches, as well as an oversized “max” version, at 6.7 inches.
With technology advancing fast and requiring more storage room, the iPhone 13 is likely to push the envelope. The device should have a 1 terabyte storage option, which is twice as much as the current version’s 512 gigabyte, at the high end. As a fun fact, the original iPhone’s storage started at 4 Gb.
- Let’s talk money
Strong demand even led Apple’s device to the top of the charts: the iPhone was the market leader in the 2020 holiday quarter, stealing the thunder from rival Samsung. Also important, the higher-end, pricier trims have been performing particularly well, a good sign for ASP (average selling price) and margins.
Here is the better news: the iPhone 13 could be an even bigger deal. Wedbush estimates that initial builds for the device hover around 100 million units. This number compares favorably, by 25%, to the iPhone 12’s 80 million in 2020.
3 Things To Know About The App Store Antitrust Probe
Apple is, once again, under the watchful eye of European regulators. The Apple Maven lists three things that investors should keep in mind, in the wake of the most recent antitrust probes
#1: Lingering battle
There is nothing particularly new about government regulators going after Apple – and the rest of Big Tech, for that matter.
The possibility of further government scrutiny increased after the App Store became the subject of a heated debate in the past year. Epic Games fought the Cupertino company over the 30% commission that Apple charges from its developers on certain transactions, claiming unfair competitive advantage.
#2: Europe sets the tone
Europe seems to be much more willing to pursue the Silicon Valley giants, acting fiercely by imposing heavy fines: $10 billion against Alphabet, $1.2 billion against Apple itself.
Expect the European authorities to lead the way in the upcoming battle against Apple and its App Store policies – and to possibly set the standard on how other countries may address the issue as well.
#3: The stakes are high
While the current investigations are unlikely to lead to a final resolution on antitrust anytime soon, they may still have a shorter-term impact on Apple and its stock.
“Any changes to the App Store’s monetization policies that arise from this fight could be a bearish development for Apple’s stock.”
The App Store is a top revenue generator within the crucial services segment. Therefore, investors should keep tabs on how the drama evolves from here.
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(Disclaimers: the author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)