Apple stock news: why did market cap fall by $77bn?

Apple stock news has been confusing to say the least, with the share price of the tech giant tumbling as the new iPhone 12 range was unveiled

The launch of a new iPhone range is normally big business for Apple stock news. According to an analyst from Evercore ISI, the tech giant’s stock tends to outperform in the 90 days before its latest range of smartphones are unveiled at a glitzy event. Indeed, in the three months leading up to the iPhone 12 devices being revealed, AAPL’s share price grew by a handsome 46 per cent.

But something weird happened as the event took place. As Tim Cook revealed all of the bells and whistles that Apple devotees can expect when the phones start to be released from mid-October, shares fell by 3 per cent. That was enough to wipe a staggering $77bn (£60bn, €66bn) off the company’s market cap.

To the casual observer, such a sell-off is confusing to say the least. This particular range of iPhones was significant because it marks the first time that Apple’s flagship phone will support 5G – lagging behind rivals. A cheaper model was also introduced in the form of the iPhone 12 Mini, creating an opportunity for the brand to win round budget-conscious consumers. And, in keeping with tradition, the new iPhones are going to be on the shelves in time for the holiday season. So what gives? Why did the stock tumble?

Here, we’re going to look at the latest Apple shares forecast and explore the factors that could have led to this drop. We’ll also look ahead to the Apple stock price forecast going forward, and find out what analysts are predicting for the next 12 months.

Apple stock news: further downside ahead?

Of course, this launch event for the iPhone 12 hasn’t been like the others. Firstly, it’s rare for Apple to deliver a presentation about its smartphones so late in the year: traditionally, this happens in September. (Some were surprised when, last month, Cook focused on Apple Watches and iPads during a virtual address.) And then there’s the coronavirus pandemic. Given the levels of economic uncertainty at the moment, it’s highly likely that fewer people will be prepared to shell out on expensive devices when the one they snapped up last year works just fine.

All of this relates to a bigger cloud on the Apple stock price forecast horizon: the fact that many consumers are perfectly content with keeping their smartphones for longer. The number of enthusiasts who plump for an upgrade every year is slowly diminishing: indeed, data suggests that most of us only splash out on a newer model every three years.

Forecasts have had to be tempered over recent years because of how sales have been sliding since 2017. It’s a mix of Apple achieving market saturation and other manufacturers beginning to gain ground with innovative, more cost-friendly models. Analysts have been hoping that the tech giant will be able to achieve a “super cycle”, where a large number of iPhone users are encouraged to upgrade this time around. Unfortunately, this doesn’t seem likely, but the company has compensated for this by diversifying its product offering and generating new revenue streams through wearable devices and smart assistants.

Optimists argue that 5G-enabled iPhones are a big deal, and that this should factor heavily in the Apple stock price forecast; on the other hand, naysayers warn many telecoms providers worldwide are behind the curve when it comes to offering these faster data speeds to the masses. This means that, unless you’re in a big city, you’re unlikely to feel any benefit from having this device because it’ll only hook up to 4G, which remains more common. There are also fears that 5G could end up draining the phone’s battery life – always a big concern to everyday users – potentially suggesting that the hardware is underdeveloped, and it might be worth waiting for the next iteration to come around.

Then there’s the fact that, from a design perspective, these new iPhones… well… don’t look radically different from the models that came before them. Although it’s thinner and lighter than previous models – a classic Apple marketing ploy – many the critics have said the new range reminds them of the iPhones seen in the early 2010s. This is effectively a retro look for the world’s most popular smartphone, and could open Apple up to criticism that it’s beginning to run out of ideas on how to push its cash cow forward.

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Apple stock: buy or sell?

Yes, there are several macroeconomic factors that aren’t in the company’s favour right now, but this doesn’t necessarily mean that Apple stock news will be overly negative going forward. Some analysts argue that it is important to take a longer-term view, and take into account how iPhone sales could fare over the next two or three years. As 5G infrastructure continues to improve and become more commonplace, this will inevitably encourage greater numbers of people to make the switch.

Several analysts have updated their forecasts for the next 12 months in light of the latest Apple stock price news, so let’s find out what the current consensus is. According to CNN Business, the upper-end forecast for AAPL predicts there will be a rise of 23.8 per cent in its share price over the next 12 months, taking it to $150; the median estimate indicates there will be a more modest rise of 4.2 per cent to $126.25; and the worst-case scenario in the eyes of experts is a low-end estimate of $80 – down 34 per cent.

When it comes to the recommendations of 39 analysts who track Apple stock news, the result is clear cut. Twenty rate AAPL a buy right now, and three say that it’s set to outperform. Meanwhile, 13 recommend holding the stock, and just three say it’s a sell.

Of course, the real proof in the pudding will be in Apple’s financial results in 2021, when we begin to see how many units of the iPhone 12 are being shipped. Analysts will be watching like a hawk to see whether the tech giant manages to establish a trend of rising sales, and wrestle away market share from rivals such as Samsung.

It also helps that Apple’s recent stock split makes its share price much more affordable for retail investors – something that could help drive demand in the months to come.

 

FURTHER READING: Stock tips: five things to do if the stock market falls

FURTHER READING: Five investment rules to always remember

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