In a week of new product and service launches, Apple stock remained flat. Here are the highlights of Apple Maven's coverage in the past few trading days.
Hot topics to kick off the week
2020 is slowly winding down. Meanwhile, Apple stock inches quietly towards all-time highs.
- Could Mac steal the show?
On Monday, Bloomberg reported that Apple could introduce its new lineup of ARM-based chips, the successor of the M1, as early as the Spring. The new piece of hardware is expected to outperform those made by Intel, Apple’s (soon to be former) partner.
This is good news for Apple investors, and likely best explains why the stock traded higher that the S&P 500 and the Nasdaq throughout Monday’s session.
- What economic crisis?
JPMorgan analyst Samik Chatterjee reported that demand for the higher-end iPhone 12 has been strongest in the holiday shopping season.
Of course, there are two sides to this equation: supply and demand. The longer lead times could be a result of supply chain delays, which would be a more bearish than bullish story.
The FAAMG stock that left Apple in the dust in 2020
Apple stock has had an impressive 2020 so far. But another Big Tech name produced even better market returns, driven by strength in e-commerce, cloud adoption and a rebound in valuations.
- Amazon stock roars back to life
Compared to the rest of the FAAMG group and even the S&P 500, Amazon had a relatively mediocre 2019. The second half of last year was particularly disappointing, which may have set up the stock for a rebound in 2020.
Digital sales in general have more than doubled in the first three quarters of the year. This is a stark contrast against US retail sales that had dropped as much as 15% year-over-year, in April. As a result, Amazon’s e-commerce revenues in North America and internationally grew by 37% and 31%, respectively, in the first three quarters of the year.
All accounted for, Amazon shares shot through the roof in 2020: up 71%.
- Will Amazon continue to outperform?
It is always hard to predict share price movement with much accuracy. Following such a strong 2020, it is not unreasonable to think that shares might need to catch a break as 2021 kicks off.
At the same time, it is hard to bet against the e-commerce and cloud giant. The holiday shopping season is already looking very promising for Amazon, with online sales stealing the spotlight. Beyond the short term, Amazon is likely to remain an e-commerce powerhouse, ever hungrier for world domination.
Apple boosts revenue opportunity
With AirPods Max and Fitness+, the company boosts it revenue potential, still in time for this year’s holiday season.
- The long-awaited AirPods Max
The over-the-year headphone has been widely anticipated. The device is priced at a rich $549 and is available today for delivery in the US as soon as December 15
Apple’s home and wearable devices have become valuable recently because of the “upsell factor”. The company spent most of the past decade and a half building up its user base. Now, it can monetize on customer loyalty for the ecosystem.
- Fitness+ debuts
On the services side, Apple had already announced connected fitness application Fitness+ in September. The price of about $10 per month or $80 per year was also know. Now, we have learned that the service can be purchased on December 14.
It is unclear how impactful Fitness+ will be to Apple’s financial results. When it comes to services, the company has had a spotty track record, with iCloud, Music and App Store being probably the only big winners so far.
Pop Quiz: Who Owns Apple?
Apple is a huge public company. Therefore, most of us probably know that Apple owners could be either Warren Buffett or our neighbors next door.
- Lion’s share goes to institutions
Currently, 59.7% of Apple shares are held by institutional investors. To some, this may seem like a very large number at first. But compared to its closest peers, Apple’ institutional ownership is relatively small.
About 40% of Apple’s owners are individual investors. However, as much as numbers like $500 million may sound like a lot, each individual investor owns less than 0.025% of Apple. In almost all cases, substantially less so.
- Why do institutions own Apple?
It would not be unfair, therefore, to pick three institutions to represent Apple’s owners: Vanguard, BlackRock and Berkshire Hathaway. Combined, these three companies own one-fifth of the largest company in the world.
These three institutions can be considered money managers, depending on how one classifies Warren Buffett’s conglomerate. Vanguard and BlackRock own Apple primarily for the purpose of allocating them to ETFs (exchange-traded funds) and mutual funds.
A Look At Wall Street Opinions This Week
For last, helping to lift Apple stock this week were a few research notes from Wall Street. The most bullish of them sees a 63% upside opportunity on what is shaping up to be good demand for the iPhone 12.
- 63% upside?
Wedbush’s Dan Ives has been consistently one of the most bullish analysts on Apple. This week, he increased his bull-case price target to $200 from $175 previously. At these levels, Apple would be valued 63% above its current market price.
- Neutral, but with a twist
Two analysts that assign a “neutral” rating to Apple have also chimed in. Interestingly, both have different stories to tell on a similar subject. UBS analyst Tim Arcuri seems a bit concerned about iPhone 12 demand in the holiday season and the potential impact to margins.
But Matthew Cabral, from Credit Suisse, has a different read on the market. He says that iPhone 12 Pro Max wait times have in fact increased by three weeks in important global markets, including the US, UK and Germany.
- The Apple Maven’s opinion
Following Wall Street’s week-by-week coverage of iPhone sales in the holiday season can be a little distracting. From what I have seen so far, however, there has been little indication that Apple’s new smartphone could be a flop in the fourth calendar quarter, which is good news.
Also, I would remind readers not to place too much emphasis on iPhone sales, even though they continue to be crucial for Apple’s financial performance. Keep in mind that the ecosystem continues to evolve, and new products like the ARM-based Mac and the AirPods Max could be sources of unexpected revenue upside.
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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)