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Apple, the huge US technology giant’s business model has been caught in the crossfire of what seems a never ending China U.S trade battle, however even with this stigma of negativity surrounding the company the technology king’s share price has remained strong, and analysts are still saying that it is still not cheap enough to buy from a valuation perspective, even after Apple faced a massive selloff.
Erin Gibbs, the equity chief investment officer at S&P global market intelligence issued a statement saying “I am hesitant to say that this is the bottom for Apple’s share price, we have not yet seen the valuation stabilize.” While Gibbs holds a positive sentiment on Apple long term holdings due mainly to the ability the company has to drive sales from new services such as their content streaming service, the headlines still are extremely negative towards the company at the moment. “We can still see several weeks as we head into the summer doldrums of Apple going down even further,” Gibbs warns.
Taken at face value Apple stock looks like an attractive investment to investors, with the stock trading on a price to earnings ratio of 14.6 times forward analysts estimate, which is only slightly below the p/e multiple on the Dow and the S&P 500, who are holding at 15.7 and 17.2 times respectively. Additionally based on Apples current p/e ratio, it is towards the bottom end of the range of the companies ratios over the last 11 years, which has shown a broad range of 10.5 times to 38.5 times.
Over the recent weeks, the trump administration has been pushing the China trade war hard, and with Apple’s partnerships and exposure to and within the country could push analysts to cut their future profit forecasts. Analysts have said that with slowing sales in china, and a higher production cost would mean that apple is still overvalued despite a recent slump in share price.
In the financial year of 2018 Apple saw revenue of $51 Billion USD from their greater china area. This area is Apples third biggest region after Americas and Europe. Apple’s exposure to china is more so due to its hundreds of suppliers that operate there who churn out the latest gadgets for the company.
Investors it would seem have made the connection, and are extremely cautious when it comes to the stock at the moment, over the past month alone Apple has seen a 10% decline in share value as Trumps Trade war has pummeled US companies that are over reliant on China. Apple stock as it stands is facing a bearish approach, which could lead to further declines, which could go both ways for investors, people looking to get into Apple stock could see the perfect time to buy, however this would rely on Apple reducing their exposure to China.
Ryan Long – IEC International
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