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How will Apple’s share price react to its new products?

In the six months following the market crash in March, Apple’s [AAPL] share price more than doubled from $55.84 on 23 March to $134.18 on 1 September — a year-to-date climb of 140%. The rally drove the tech behemoth’s market cap so high it became the first company to be valued at over $2trn.

Apple’s share price has lost a little of that momentum in the last couple of weeks though, falling 13.2% over the first eight trading days of September, which dipped its valuation back to $1.9trn.

Global lockdowns have ushered in an increasing reliance on technology, which has been a major driver of Apple’s share price so far this year, but September is proving to have its headwinds. For the month to 15 September, Apple’s share price is down 10.5%

15 September saw Apple announce a bumper load of new products in its fall launch event. Will this new range help to refresh Apple’s share price?

 

 

Stock split backlash

At the end of July, Apple announced a 4-for-1 stock split — the fifth time the company has made such a move since 1987. On previous occasions, share value fell an average of 5.6% within two weeks of the split, according to CNBC.

Apple stated that it wanted its stock to be more accessible to more investors.

The split sent Apple’s share price down 3.3% to $129 by the 31 August. This was followed by a tech stock sell-off in early September that saw the Nasdaq tumble nearly 8% and the S&P 500 lose 4% in a week. 

3.3%

Apple's share price decline after announcing its stock split

  

Retaliation to tech tax

Apple’s share price may also be affected further as many countries start to enforce a digital services tax (DST) on major tech companies.

The new levy is the result of many European nations’ frustrations with the US firm earning millions from its European customers but paying negligible levels of tax in the region. The UK, France, Spain and Italy spearheaded a campaign for a global tech tax, which was scuppered in June when US treasury secretary Steven Mnuchin rejected it. He said that if countries acted unilaterally America would retaliate with tax hikes of its own.

Despite Mnuchin’s warnings, the UK, France and Italy introduced its own DST of 2% on “large businesses that provide a social media service, search engine or online marketplace to UK-based users”, according to Norton Rose Fulbright.

Apple reacted swiftly to recoup the money by charging app developers more.

“When taxes or foreign exchange rates change, we sometimes need to update prices on the App Store,” the company said in a statement. Amazon [AMZN] and Google [GOOGL] also passed DST costs onto third parties, but Facebook [FB] has so far refused to do so.

 

Upcoming product line-up

Apple’s share price will undoubtedly be boosted further by its much-anticipated iPhone 12 and accompanying game-changing 5G capabilities.

However, investors may have to wait for that spike after Luca Maestri, CFO of Apple, told analysts that the phone’s launch would be delayed for a few weeks beyond its mooted 15 September date.

Despite this setback, with strong fundamentals — Q3 results showed revenue up 11% to $59.7bn and earnings up 18% at $2.58 per share — Apple’s share price looks likely to continue its rise.

“We’d expect near-term retail demand for Apple shares to increase, especially given the current market environment,” said Katy Huberty, an analyst at Morgan Stanley, according to Investor’s Business Daily.

“We’d expect near-term retail demand for Apple shares to increase, especially given the current market environment” - Katy Huberty, Morgan Stanley analyst

 

We’d note that retail investors have already been able to buy fractional shares, so the overall retail impact may not be as overwhelming as some perceive,” Huberty added.

Among 41 analysts polled by CNBC, the consensus was to buy the stock, with 15 rating it a Buy, 11 a Strong Buy, nine a Hold and two each a Sell and an Underperform. The stock has a consensus price target of $117.14, which represents a 1.4% rise from Apple’s share price through 15 September’s close.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

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