Apple Inc. is enjoying some good news and renewed confidence from investors. The firm had reported its Q1 earnings in April, posting its first sales decline in 13 years. Following this, its stock declined by 13.4% between late April and May 12. And, on May 16, Warren Buffett – the Oracle of Omaha – disclosed that he holds a stake worth $1.2bn in the firm, which helped Apple’s stock rebound slightly.
Apple shares helped by Buffet effect
Since Buffet’s revelation, Apple’s shares have soared 9%, and have breached the $100 mark – its highest point in a month. Buffett tends to have that effect on stocks, for example, when his firm disclosed a 0.45% stake in Kinder Morgan in February, its shares shot up 11%.
An important point worth noting is – back in 2011, when Berkshire first disclosed their IBM stake at 0.49% – Buffett’s first tech stock – the shares dropped by 0.96% on the day and 19.4% to now. Buffet has been repeatedly questioned if he regrets the decision to buy IBM, but he has held strongly on his principles of long-term investing.
For Buffett, what matters is where the stock would be trading ten years from now.
iPhone news also helped
Apple’s stock rise in the past few weeks can partially be attributed to Berkshire Hathaway’s disclosure, and partially to some fairly bullish news by the iPhone maker. Apple seemingly upped its production targets – a good sign for the company’s iPhone 7 sales.
Apple Inc. has asked the producers that by the end of the year, it wants to make 72m to 78m iPhone 7 – its highest production target in about two years, said Barrons. Analysts’ expectations for the year were just 65m iPhones.
Apple’s consumer base has stalled in China, and the investors hope the massive potential in India will make up for it. Earlier this week, Indian officials said that for opening multiple stores in India, Apple will have to produce at least 30% of its material locally. Currently, majority of Apple products are built in China.
Apple – a ‘dead money stock’
Separately, an analysis of Apple’s stock published Thursday, says Apple has turned into a ‘dead money stock.’ In a blog post, WolfStreet.com’s Alex Barrow said the firm has reached the end of the ‘technology S-curve,’ indicating the mobile technology it helped to pioneer i.e. smartphones has matured, and there is no scope of it growing or contracting in the foreseeable future.
The blogger does not recommend shorting Apple, but thinks investors will be better off to put their money elsewhere ahead of a “long grind sideways.”
Also, on Thursday, CNBC’s Jon Najarian reported that 7.5m Apple Inc. shares were ordered at $99.16 per share on the Midwest Stock Exchange. This was quite puzzling, and likely, the same person or the entity placed another order for five million shares at a price of $99.16 per share.