What is driving Apple to Hit All-time High? Rub-off on ASX 200 Tech Stocks?

Summary

• NASDAQ recently reported that Apple Inc. became the first publicly listed US company to cross USD 2 trillion in market capitalisation, with strong results from retailers Target and Lowe's lifting sentiment.
• Apple’s record June 2020 quarter was driven by double-digit growth in Products & Services and progress in each geographic segment.
• The much-awaited upcoming stock split of the Apple stock to make it “more accessible to a broader base of investors” has been whetting investor appetite further.
• Australian technology companies are capitalising on the increasing demand for technology-based solutions like digital payments, cloud computing and many more.
• ASX200-listed technology stocks have been hitting record highs, with these businesses functioning uninterruptedly, moving up the ladder and witnessing growth.

Apple Inc. (NYSE:AAPL) is crowned the most valuable listed company in the world. Tech titan and part of the renowned FAANG stocks, Apple Inc. shares, trading on NASDAQ, jumped over 5 per cent to a fresh closing high of USD 497.48 on 21 August 2020, furthering its post-earnings and pre-split gains. The stock was up by 5.15 per cent relative to its last close and has a market capitalisation of USD 2.13 trillion. Interestingly, the Company’s market capitalisation has recently topped a staggering USD 2 trillion post blockbuster third-quarter results.

KNOWLEDGABLE WATCH: What is happening with Apple Shares?

What’s Propelling Apple Stock Surge?

Firstly, investors seem keen on Apple’s upcoming stock split. The Company reportedly plans to split its shares 4-for-1 with the intent to make its stock better accessible to a wider investor base, later in the month. Apple affirmed that each shareholder of record at the close of business on 24 August 2020 would receive three additional shares for every share held on the record date, and trading will begin on a split-adjusted basis on 31 August 2020.

The 4-for-1 stock split is similar to exchanging a USD 1 bill for four quarters- the amount of money is still the same after the exchange with the sole difference being that it now would get divided up into more portions.

Moreover, stock splits do not change the fundamental value of a business- an add on for investors who trust Apple’s business values. Experts opine that subsequent buying of the stock post stock split tends to drive up a stock's price (though temporarily).

Secondly, Apple has stood robust amid the ongoing market volatility, be it the new USD 100 million Racial Equity and Justice Initiative or the commitment to be carbon neutral by 2030. The Company’s principle of what it makes and does should create opportunity and leave the world better than it found it seems to have garnered the market’s attention.

Thirdly, investors have been particularly pleased with the tech titan’s robust growth across all of its major business segments, as evidenced in its latest quarterly report. Before diving into these details, it should be noted that in a dismal year of business owing to COVID-19, Apple has been one of the few companies that has shone.

Let us find out how and why-

Apple’s Third Quarter 2020 Results

The impressive results of June quarter 2020 were primarily “driven by double-digit growth in both Products and Services and growth in each of (our) geographic segments”, said CEO Tim Cook. He went on to say that amid the ongoing uncertain times, Apple’s recent performance has been a testament to the important role that its products play in the huge customers’ base, besides the Company’s relentless innovation.

For fiscal 2020 third quarter ended 27 June 2020, Apple Inc.-

• Posted quarterly revenue of USD 59.7 billion, an increase of 11 per cent from the year-ago quarter.
• Quarterly earnings per diluted share amounted to USD 2.58, up 18 per cent.
• International sales accounted for 60 per cent of the quarter’s revenue.
• EPS grew by 18 per cent.
• Apple generated operating cash flow of USD 16.3 billion during the reporting period.
• Board of Directors declared a cash dividend of USD 0.82 per share of the Company’s common stock.

MUST READ: Apple Announces 4 for 1 Stock Split, Posts Record Quarter Despite Pandemic Disruptions

With Apple ruling the tech space currently, let us cast an eye on how ASX200-listed tech stocks have been performing-

ASX Tech Stocks

Its not only Apple that is making the technology sector the talk of the town. In Australia, S&P/ASX 200 Information Technology (Sector) was trading up by 3.02 per cent at 1,865.8 at market close on 24 August 2020. Simultaneously, S&P/ASX All Technology Index was also up 2.68 per cent at 2,471.2.

ASX-listed technology stocks have defined resilience and continue to write success stories amid the market volatility owing to the pandemic. There has been an accelerated shift in the digital payments’ issuance and acceptance. Subsequently, EML Payments Limited (ASX:EML) leveraged from this transition, evident from its robust financial performance during FY20 with soared group revenue of 25 per cent.

Moving on, with elevated global demand for technological and digital solutions by large logistics service providers, companies like WiseTech Global Limited (ASX:WTC) has been taking strategic and operational initiatives at the back of its highly cash generative business, bolstered balance sheet and solid cash flows.

MUST READ: Resilient ASX 200 Technology Stocks: EML Payments and WiseTech share prices

Besides, Afterpay Limited (ASX:APT), Xero Limited (ASX:XRO) and Nearmap Limited (ASX:NEA) have recently registered fresh highs in their share prices and settled at AUD 82.730, AUD 98.490 and AUD 3.040, respectively on 24 August 2020.

Burgeoning opportunities driven by the “new normal”, technological adoptions fetching attention and fintech sitting on a gold mine seems to be driving the technology sector’s popularity in the current market. However, sinusoidal equity market trends are a reality, and socio-economic factors play an integral role. It will be interesting to gauge technology businesses evolve from lessons learned from the pandemic and review their broader strategic agenda.

MUST READ: Technology Space in the face of COVID-19; Investment Tips for Tech Stocks