On Thursday, Apple shares (NASDAQ: AAPL) closed at $120.99 which is 3.5% lower. In the after-hours session, the price further declined by 0.2%. The underperformance of Apple stock is visible in the S&P 500 that dropped by roughly 1% in the last five trading days, while the stock performance in the same period dropped by 5.5%.
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Spiked sell-off in the overall market
The recent drop in the tech giants is considered to be due to the rising interest rate on bonds. The 10-year Treasury yields have moved as high as 1.61% which is the highest in the year and is not adjusted for inflation. The speculation of rise in inflation is the basis of fear for the investors as they believe the Feds will have to raise interest rates which will have a negative impact on the stocks. The spike in the sell-off in the overall market has caused NASDAQ, S&P 500, and Dow Jones Industrial Average to steer towards the flat line.
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Impressive first quarter as well as 12 months performance
However, when it comes to Apple, the fundamentals of the company’s business have not wavered across the globe. This makes a case against the Apple bear tugging downwards on the price-movement of shares in the long-term. Apple is one of those blue-chip companies that are economically and financially sound during times of recession which it was during the COVID-19 recession. For the past 12 months, the stocks of Apple are up by 70%. It is the biggest publically listed company with a $2.1 trillion market capitalization.
The first quarter of 2021 was a solid breakthrough for Apple (NASDAQ: AAPL). The pioneer growth-driver for the pioneer innovator in the technology sector, this time are the new 5G iPhones. The generated revenue for this quarter by the 5G iPhone 12 is around $110 billion which is more than a 9% jump from the previous year’s revenue. Furthermore, the full impact of the sales of the iPhone 12 is to be seen through the rest of the quarters of the year. The expected revenue of Apple in 2021 is to jump by 21% from the previous year.
Increase in Dividend
The shareholders at Apple Inc. have decided in this year’s meeting held on Tuesday to re-elect the company’s entire board of directors while also approving last year’s executive compensation program. A recent observation about Tim Cook was made by the board that since his role of CEO, the company’s market cap has increased by more than $1.5 trillion while the dividends (including the shareholder return) was a triple-digit increase of 867%. Following this, Cook has stated that the company will increase the dividends of its shares to 20.5 cents.
Return on Invested Capital Metric
To further look at how effectively Apple has its cash management and business operation, we analyze at the valuation metric called Return on Invested Capital (ROIC). In ROIC, every dollar that is invested into the company is checked against how much revenue it generates by certain business operations and fundamentals of the company. In the case of Apple, in the first quarter of 2021, the ROIC was at a highly impressive 34%. This means that for every $1 invested into the Apple stock, the company produced $0.34. The stated metric number indicates a very efficient and highly profitable business fundamental and business model of Apple Inc.
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Apple expanding horizons in 2021
Apple is not just sustaining its growth but is picking up the pace along with the recovery of the economy along with administering COVID-19. One example of this expansion is that Apple has announced the expansion of its presence in the Target Stores where customers will experience “enhanced Apple shopping”. In addition to this, there is ongoing speculation sourced by a South Korean online news site, of potential for Kia and Apple to partner up and produce EV-cars. This news refers to last year agreement (MOU) signed between Hyundai Motor Company’s subsidiary – Kia Corp. and the high-profile tech giant Apple or cooperation in 8 sectors These fundamentals show that the outlook of Apple’s business operations will overshadow any bearish slumps and market dips, in the long term.
