Apple's stock has fully recovered after the coronavirus earnings warning
At Tuesday's NASDAQ opening, Apple's stock price has recovered all of the losses it suffered since the company announced it would miss its guidance over coronavirus issues in February.
Apple issued a statement on on February 17 warning that it anticipated missing its guidance for the next quarter, citing the ongoing outbreak the COVID-19 coronavirus. Shortly after the announcement was made, the share price tumbled a short distance, from $324 at the end of the trading day to just above $315 near the start of trading the following day.
A deeper impact was felt for the next month, dropping the stock to a low of $229.24. The stock resumed a generally upward trajectory in late March. Though it was slow to return to the trillion-dollar level, it managed to do so in April.
The rebound of the share price is one indicator in the market's faith in Apple's revenue, despite the ongoing epidemic. Shortly after the guidance changes, analysts offered their takes on the earnings miss announcement, with the general theme being the suggestion it was a short-term problem with no long-term concerns for the company.
The immediate drop of 2.5% of the share value was considerably less than felt after a similar announcement of missed earnings in early 2019. In that notice, which related to lower than anticipated revenue, the drop was a far larger 8.6% at the start of trading, and even went down further after markets opened for the day. However, the magnitude of that drop as compared to the coronavirus hit when all was said and done was much less.
In the time since the guidance correction, Apple has opened up multiple retail stores in China, and across the world that it had closed in February as a preventative measure. Stores are serving customers with limited business hours, temperature checks performed on visitors, and maximum occupancy limits.
Retail is only part of the equation, as the coronavirus caused temporary issues for Apple's manufacturing, due to the vast majority of its supply chain existing in China and surrounding areas.
Reports from February suggested suppliers in the iPhone chain were operating at between 30% and 50% of capacity, in part due to temporary factory closures and the quarantining of staff, though there were assurances from major assembly partner Foxconn that the virus wouldn't majorly impact current production plans.
A few months later, Apple is slowly opening its retail outlets to customers in other countries, while CEO Tim Cook told analysts during the Q2 financial results production resumed back at typical levels by the end of March. Cook also expressed confidence in the iPhone maker's ability to bounce back from the pandemic, due to its continuing investment in its future.
In the Q2 2020 results, Apple revealed overall revenue was up 1% year-on-year at $58.3 billion, though this is below its original forecast range of $63 billion to $67 billion. While iPhone, iPad, and Mac revenue were all down from one year ago, the "Wearables, Home, and Accessories" category rose by $1.2 billion to $6.3 billion, and Services continued its highly-reliable growth trend to $13.4 billion.
Apple issued a statement on on February 17 warning that it anticipated missing its guidance for the next quarter, citing the ongoing outbreak the COVID-19 coronavirus. Shortly after the announcement was made, the share price tumbled a short distance, from $324 at the end of the trading day to just above $315 near the start of trading the following day.
A deeper impact was felt for the next month, dropping the stock to a low of $229.24. The stock resumed a generally upward trajectory in late March. Though it was slow to return to the trillion-dollar level, it managed to do so in April.
The rebound of the share price is one indicator in the market's faith in Apple's revenue, despite the ongoing epidemic. Shortly after the guidance changes, analysts offered their takes on the earnings miss announcement, with the general theme being the suggestion it was a short-term problem with no long-term concerns for the company.
The immediate drop of 2.5% of the share value was considerably less than felt after a similar announcement of missed earnings in early 2019. In that notice, which related to lower than anticipated revenue, the drop was a far larger 8.6% at the start of trading, and even went down further after markets opened for the day. However, the magnitude of that drop as compared to the coronavirus hit when all was said and done was much less.
In the time since the guidance correction, Apple has opened up multiple retail stores in China, and across the world that it had closed in February as a preventative measure. Stores are serving customers with limited business hours, temperature checks performed on visitors, and maximum occupancy limits.
Retail is only part of the equation, as the coronavirus caused temporary issues for Apple's manufacturing, due to the vast majority of its supply chain existing in China and surrounding areas.
Reports from February suggested suppliers in the iPhone chain were operating at between 30% and 50% of capacity, in part due to temporary factory closures and the quarantining of staff, though there were assurances from major assembly partner Foxconn that the virus wouldn't majorly impact current production plans.
A few months later, Apple is slowly opening its retail outlets to customers in other countries, while CEO Tim Cook told analysts during the Q2 financial results production resumed back at typical levels by the end of March. Cook also expressed confidence in the iPhone maker's ability to bounce back from the pandemic, due to its continuing investment in its future.
In the Q2 2020 results, Apple revealed overall revenue was up 1% year-on-year at $58.3 billion, though this is below its original forecast range of $63 billion to $67 billion. While iPhone, iPad, and Mac revenue were all down from one year ago, the "Wearables, Home, and Accessories" category rose by $1.2 billion to $6.3 billion, and Services continued its highly-reliable growth trend to $13.4 billion.
Comments
thing is certain. You didn’t take the time to research anything, such as the state of the economy around the world. If you had you would know that (a) in Apple’s largest markets—China, for one—the economy is not in “economic ruin”, and (b) Apple’s earnings performance and outlook confirm that the drop in stock price was overdone, and the stock is, at a minimum, fairly valued.
While it is true that COVID is a highly contagious disease, the effect on Apple’s business is not as crippling as you make it out to be.
Sound crazy somewhere else.
Personally am planning on buying plenty of Apple hardware this year, currently waiting to see what (if any) hardware gets announced around WWDC so I can potentially buy multiple items on a single invoice.
Your point that it makes no sense that ANY stock would be approaching its highs at the start of what's likely a multi-year pandemic scenario is a reasonable one. And that Apple might be able to do it in spite of all stores being shut down for a couple of months would have been counter-intuitive in March. Then again, school districts around the US are making HUGE orders of iPads; Apple shows their supply chain isn't disrupted by selling existing products and releasing (great) new ones; and the rumor mill is showing more amazing products. You can point to many reasons that 2020 is the time when Apple and the big tech firms and the ecosystems around them are seen to be more important than ever. Apple seems to be in control of their fortunes to the surprise of no one who has seen their record, of course.
Hindsight is always 2020 and the future is a fog. No one predicted this was coming and now we see Apple emerging from that fog like some hero or sports team. To some thunderous music and cheering.
It was reasonable that there was a plunge in all stocks, we can make some kind of a narrative for why it's been a V-shaped recovery for Apple, and also reasonable to suspect a W is on the way. You're saying there are macro reasons to be bewildered by all this. You and me and so many others. Then again I'm glad I didn't sell in March and kicking myself for not buying more.
I would say that - whatever IMF says - the markets have already priced in what they think the economic effects will be, and AAPL still looks really attractive (maybe even more so than before C-19). Of course, they could turn out to be wrong especially if there's a 2nd wave of infections in the fall that leads to a return of lockdowns. My sense of this is that there will be a great resistance to returning to lockdowns/stay-at-home orders this fall in the EU and in the US for various (obvious) reasons. So, even if there's a 2nd wave apparently we're all going to just muddle through it while continuing to go to work.
Another thing that is going for AAPL is that there is just some money whose owners want it to be in stocks, and AAPL looks pretty good at this time compared to a lot of the other stocks.
Still another thing going for AAPL is the tailwinds from the growing wearables segment, and as well expectations that the iPhone SE will be a huge success. Not to toot my own horn but imma toot my own horn: I predicted AAPL at $320 by the time 2020Q1 earnings were announced and damn near nailed it. Right after, I predicted $340-$350 for the following quarter. Of course that was before C-19 hit (I shoulda sold when Apple restated earnings!). I think what we are seeing now with AAPL is a return to its trajectory prior to the pandemic recession. So, long story short I don't think AAPL is wildly overvalued at all. I don't see AAPL getting to and staying at $400 by 12/31 but I would totally bet that it will be in the upper $300s as the holidays approach.
I doubt anyone from government, business or academia has any real handle on what things look like 6 months or a year from now, but the economic impact of the worldwide shutdown that popped a massive bubble is still unwinding. About a quarter of Americans missed either the rent payment or the mortgage last month. Close to 40 million have lost their jobs and it is estimated that somewhere between 25-33% of those jobs will not be coming back regardless of the economy. Some states, like Florida, have only 12 weeks of unemployment- most have 26 and the benefits are quite meager and do not replace a lost middle class job.
A lot of speculation is based upon a “V” shaped recovery and that is increasingly looking like a pipe dream.
A year from now, when unemployed people have no insurance and cannot pay for housing, utilities or groceries, I do not seeing them buying a new iPhone, a Mac or subscribing to Apple Music or TV+.
I could agree or argue with all of these points including that one you quoted. Apple did a lot of things right notably building that monstrous cash cushion and apparently keeping that production capacity strong and having amazing products, just to name a few. Still, on the macro side, no one can see through the fog and anyone telling a narrative now needs to know that none of it was foreordained. Anyone here remember Andy Zaky with his AAPL-only hedge fund? He's still a hoot to listen to:
The key difference between $AAPL in Jan 2019 at $140 and $AAPL in Mar 2020 at $212 is that 2019 $AAPL was in a booming economy and traded at a discounted P/E ratio. In 2020, $AAPL faces a decimated economy with 20% unemployment and trades at a sky high 25 P/E ratio. from https://twitter.com/BullishCross/status/1263927311750987776