Apple Stock Continues to Best the Market
There are plenty of worries about Apple Inc.’s (NASDAQ: AAPL) business as the pandemic spreads. At the top of the list are two major issues. People will cut back on spending for consumer electronics as they worry about their finances. Just as critical, Apple’s Chinese suppliers will not be able to deliver parts. Despite these concerns, Apple’s shares have handily outperformed the market.
In the past month, Apple stock is off 9% while the S&P 500 is down 15%. When the market took its biggest beatings, Apple did better as well. There are several reasons for this and, as a group, they are unique to Apple.
Apple’s brand is the world’s most valuable by far. Research firm Interbrand puts its value at $234 billion. In second place, Google’s value is $167 billion, followed by Amazon at $125 billion. Interbrand points out that among the reasons for a high valuation are customer loyalty, a universal presence and stability of sales. Interbrand’s researchers cite Apple’s leadership in innovation, which dates back to 1984. This now extends across the iPhone, iPad, Apple Watch and AppleTV+.
Next, Apple’s balance sheet puts it in a position to weather virtually any storm in the global economy. Apple had $106 billion in cash and marketable securities among its assets at the end of last quarter. Among its long-term assets, it had another $99 billion in marketable securities. Apple generated $30 billion in cash from operations over the course of the quarter. Its cash pile is growing rapidly.
Apple’s new services business is its most rapidly growing. It relies on Apple’s network of over a billion devices, an extraordinary hardware platform. Services include the new AppleTV+ product, the massive App Store, and a music inventory of 60 million songs. Its Apple Card makes it part of the global payment system and has successfully challenged MasterCard and Visa.
Because Apple does business in every country in the world, it will be successful in those nations where COVID-19 has not reached or those where the number of infections is falling. The best example of this is that Apple closed all its stores in China when the pandemic was at its worst there. As cases dropped, it reopened many.
Apple’s large product line, cash position and brand loyalty will take it through the crisis as well as almost any other huge company.