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Technology

Buy Apple Stock at Record Highs Before Q1 Earnings?

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Apple AAPL stock helped the Nasdaq hit new highs this week and the company reached its own records on Friday heading into the release of its first quarter fiscal 2021 earnings results on Wednesday, January 27. Apple has now jumped nearly 30% since the end of October and analysts are high on its newest iPhone.

Continued Domination

Apple needs no introduction as it continues its steady expansion beyond iPhones into services and more. But despite its successful diversification, its flagship smartphones still play a vital role at the company and on Wall Street, and accounted for 50% of total revenue in fiscal 2020.

Luckily, Wall Street is high on its first 5G-capable iPhone that launched in October. The iPhone is available in four models at various price points. Apple priced its higher-end models roughly the same as last year’s iPhone 11, despite the new features and its 5G abilities. And Morgan Stanley analyst Katy Huberty called the iPhone 12 “Apple’s most successful product launch in the last five years.”

Apple has also benefitted from stronger Mac and iPad sales during the remote work and school environment. And its wearables unit that includes its smartwatch and popular wireless headphones has also grown, up 25% last year to top its key services unit’s 16% expansion.

Apple now has revenue streams coming from its massive App store, subscription services such as Spotify SPOT competitor Apple Music, as well as its streaming TV service that hopes to one day compete against  Netflix NFLX and others. The company also has a news offering, video gaming, and more.

Apple’s paid subscriptions grew by more than 35 million sequentially to reach over 585 million paid subscriptions across its various services last quarter. And executives expected to reach a total of 600 million before the end of the 2020 calendar year.

Before moving on, it is also worth remembering that Apple is pushing harder to bring more of its chips in-house. The move is projected to help cut costs and improve battery life and performance, as it continues to close the loop, while diversifying. There are even reports that Apple is trying to enter the electric vehicle space.

 

 

 

 

 

 

 

 

 

 

 

 

 

There’s More

Apple’s ambitious plans can go even further given that it ended last quarter with about $80 billion in net cash. The company has been slowly reducing its cash position to try to reach “a net cash neutral position over time.” Last quarter, it returned around $22 billion to shareholders via dividends and buybacks—its dividend yield rests at 0.60% right now.

Apple also remains the world’s most valuable brand and its stock price has outpaced Microsoft MSFT and Amazon AMZN over the last five years, up 460%. More recently, its shares have climbed 75% in the last year and 22% in the past three months.

Apple trades at 7.1X forward 12-month sales. This marks only a slight premium to its industry and represents a solid discount to Microsoft’s 10.2X, as it has for years. And AAPL’s 4-for-1 stock split at the end of the summer made it more attainable and attractive to many investors.

Bottom Line

The pandemic forced Apple to push back the release of its next-generation iPhone to October and not late September. This will help slightly boost its Q1 fiscal 2021 sales, as it goes up against an easier-to-compare period.

Zacks estimates call for Apple’s adjusted first quarter earnings to climb over 11% to $1.39 a share, on nearly 12% strong revenue that would see it pull in over $100 billion in a single quarter for the first time ever, at $102.6 billion.

Apple’s fiscal 2021 revenue is then projected to jump 17%, with its adjusted earnings expected to come in 23% higher. And AAPL’s positive longer-term earnings revisions help it land a Zacks Rank #2 (Buy) right now.

There are always risks to playing a stock for near term gains around earnings, especially when it has surged to new highs heading into earnings. That said, longer-term investors shouldn’t worry about trying to time Apple if they are optimistic about its counited success.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don’t buy now, you may kick yourself in 2021.

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Business

GameStop stock hits record high when short sellers clash with Redditors

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GameStop’s stock price, which had dropped steadily over the previous five years before beginning a climb last fall, closed at an all-time high on Friday following a tremendously volatile week in which Reddit-organized day traders made a lot of trouble for investment firms short-selling the stock.

Trading of GameStop stock on the New York Stock Exchange was halted twice Friday, but not before the price peaked at $73.09. It closed at $65.01, beating the previous record of $63.30 set on Dec. 24, 2007. GameStop closed on Thursday at $43.03, and when the surge began last week, it was around $20 a share.

What’s going on? Well, at the beginning of September, the stock started rallying out of the $5 doldrums where it had been for a little over a year. That’s because dog food tycoon Ryan Cohen (the founder of Chewy, which he sold for $3.35 billion in 2017) had just purchased a 10% stake in the beleaguered video game retailer. He and two allies have since joined GameStop’s board of directors, and those positions could help Cohen act on his tough talk about where GameStop’s priorities should be. Cohen says the Texas-based company needs to give up its continued brick-and-mortar retail focus altogether and move to “a technology-driven vision.”

What’s behind the eye-popping stock price surge this week, reports Ars Technica, is “a massive short squeeze bubble.” In the investing practice known as short selling, a party borrows shares of a stock and immediately sells them at the current market price; when the price later drops (as a short seller is betting it will), the short seller buys back the same number of shares to return them to the lender — and makes money by having to pay back less than what the shares were worth at the time of borrowing.

In this case, GameStop’s stock price is rising, forcing these short sellers to buy more shares at a higher price to cover their positions. That has put GameStop’s stock price in an upward spiral, one that analysts like Wedbush Securities’ Michael Pachter think will quickly come to an end.

“The smart money already got in and probably got out,” Pachter told Ars.

The smart money got in more than a year ago, reports Motherboard. Some of it came in from investors on the subreddit WallStreetBets, a community that styles itself as “Like 4Chan found a Bloomberg Terminal.” A Redditor there posted screenshots from 2019 of a $50,000 purchase of GameStop shares, when the stock price was below $1.

That’s because WallStreetBets (and others) reasoned that if they bought in to GameStop, short sellers would eventually have to cover their positions together, driving the price way up. “There is likely not an original GameStop-issued share left on the market,” noted one Redditor. In other words, GameStop has issued more shares than are actually available to buy. Higher demand plus scarce supply equals a higher price, of course, and short sellers buying up stock to cover their debts — along with, of course, interest from new investors looking to short the stock — is what’s driving the demand.

Citron Research is one of those short sellers, and on Friday the firm said it was no longer commenting on GameStop’s stock because “an angry mob” had made it a dangerously volatile stock, Bloomberg reported. Citron also alleges that these miscreants had tried to hack the company’s Twitter account, after the company criticized the stock on Tuesday and then made plans for a livestream on social media to discuss that.

GameStop’s closing price on Friday gave it a market capitalization of $4.5 billion, almost 20 times higher than what the company was worth as of late July. But none of this means GameStop has actually recovered or saved itself as a business. Indeed, its last quarterly earnings report, in December, showed revenues still declining and losses per share increasing over the same figures a year before.

In the past two years, the company has closed more than 750 stores out of the 5,700 locations it had as of 2019. The same year, the company got rid of top executives and fired more than 100 corporate staffers, in a round of layoffs that also gutted the staff of GameStop-owned Game Informer magazine.



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Science

SpaceX to set record for most satellites launched on a single mission

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  • SpaceX’s Transporter-1 mission is set to lift off on Saturday, January 23rd at 9:40am EST.


    Trevor Mahlmann

  • This will be the fifth flight of this rocket, which will attempt to land aboard the ‘Of Course I Still Love You’ droneship, which is stationed west of The Bahamas ~130 miles off the coast of Miami.


    Trevor Mahlmann

  • The mission will ride to orbit with thanks to help from Falcon 9 B1058.


    Trevor Mahlmann

  • A view of the rocket after it went vertical.


    SpaceX

As early as Saturday morning, SpaceX will launch the first dedicated mission of a rideshare program it announced in late 2019. As part of this plan, the company sought to bundle dozens of small satellites together for regular launches on its workhorse Falcon 9 rocket.

There seems to have been a fair amount of interest in the program, which offered a very low price of $15,000 per kilogram delivered to a Sun-synchronous orbit. For its first “Transporter-1 mission,” SpaceX said it will launch 133 commercial and government spacecraft, as well as 10 of its own Starlink satellites. SpaceX had to obtain permission to deploy these Starlink satellites into a polar orbit.

With this launch of 143 total satellites, SpaceX will surpass the previous record holder for most satellites launched in a single mission, set by an Indian launch vehicle in 2017. In February of that year, the Polar Satellite Launch Vehicle successfully delivered 104 satellites into a handful of different Sun-synchronous orbits.

SpaceX has not disclosed many details about the popularity of its rideshare program, nor has the company announced the number of payloads booked on future launches. However, several customers have said they were surprised by the cost and speed of the service SpaceX offered. Last year, after booking as a rideshare on a Starlink launch that flew in the summer of 2020, the satellite operator Planet publicly discussed how quickly the deal came together.

“This is the result of SpaceX dramatically cutting the cost of access to launch,” Mike Safyan, vice president of launch at Planet, said in June. “It’s significant. They cut the price so much we could not believe what we were looking at.”

Planet is launching 48 of its SuperDove satellites on the Transporter-1 mission.

The mission will be closely followed by small satellite rocket companies, including Rocket Lab and Virgin Orbit, which now have proven boosters, as well as companies still developing their rockets. While smaller rockets can offer dedicated service for small satellites by putting them up one or two at a time, it will be difficult to compete with SpaceX on price. Competitors will be watching to see how orderly the dispersal of the satellites will be—according to SpaceX’s timeline for the mission, deployment will occur in 12 waves.

Weather is a moderate concern for Saturday’s launch attempt, which is scheduled for 9:40am ET (14:40 UTC) from Cape Canaveral Space Force Station in Florida. According to forecasters, there is a 40 percent chance of weather violations due to thick clouds and cumulus clouds. Weather in the recovery area for the booster looks good.

The first stage of this rocket will be making its fifth flight. It made its debut back in May 2020 with the historic Demo-2 mission that carried Doug Hurley and Bob Behnken to the International Space Station. Since then, it has flown about every two months. It last launched a cargo supply mission for NASA to the International Space Station on December 6.

A webcast should begin about 15 minutes before the launch window opens on Saturday morning.

Transporter-1 launch.

Listing image by Trevor Mahlmann



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Business

Stock futures fall after record week

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Axios markets editor Dion Rabouin provides insight into the winners and losers in the ‘Biden market.’

U.S. equity futures were trading lower the day after the S&P 500 and Nasdaq notched record closes.

The major futures indexes suggested a decline of 0.7% when the opening bell rings.

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Asian stock markets retreated Friday after a resurgence of coronavirus infections in China and a rise in cases in Southeast Asia.

The Nikkei 225 in Tokyo sank 0.4%, the Hang Seng in Hong Kong fell 1.6% and China’s Shanghai Composite Index lost 0.4%.

In Europe, London’s FTSE was off 0.9%, Germany’s DAX fell 0.9% and France’s CAC declined 1.3%.

The big number in the U.S. that traders will be watching will be existing home sales for December. The National Association of Realtors was expected to say that sales of previously owned homes slipped 2% month-over-month to a seasonally adjusted annual rate of 6.55 million units, down from 6.69 million in November.

HOUSING MARKET STAYS TIGHT AS HOMEOWNERS STAY PUT

The first week of earnings season wraps up Friday morning with a trio of financial names reporting: Ally Financial, Regions Financial and Huntington Bancshares.

Other companies reporting will be energy equipment and services giant Schlumberger, and railroad Kansas City Southern.

IBM shares are down more than 7% in the premarket after saying the company expects to return to revenue growth this year, after reporting lower sales every quarter in 2020. In the latest quarter, IBM’s revenue fell to $20.37 billion from $21.78 billion a year earlier. Fourth-quarter profit fell to $1.36 billion, or $1.51 a share. On an adjusted basis profit from continuing operations was $2.07 a share.

Intel shares are under pressure, down more than 4% in the premarket. The company reported record annual sales and fourth-quarter results topped expectations, but the company plans to outsource some chip production.

Ticker Security Last Change Change %
I:DJI DOW JONES AVERAGES 31176.01 -12.37 -0.04%
SP500 S&P 500 3853.07 +1.22 +0.03%
I:COMP NASDAQ COMPOSITE INDEX 13530.914939 +73.67 +0.55%

On Thursday, the benchmark S&P 500 index ended up less than 0.1% at 3,853.07 and the Dow Jones Industrial Average lost less than 0.1% to 31,176.01.

The tech-heavy Nasdaq composite climbed 0.6% to 13,530.91 after traders bid up shares in Big Tech stocks, including Apple, Amazon and Facebook. That helped outweigh losses in energy, bank and other stocks.

Stocks have risen on optimism the rollout of vaccines developed by U.S., European and Chinese drug companies would allow economies to return to normal.

BIDEN’S $1.9T CORONAVIRUS RELIEF PACKAGE ‘GOOD STEP’: ECONOMIST MARK ZANDI

Markets also have been encouraged by the inauguration of President Biden, who has proposed a $1.9 trillion economic aid package, including $1,400 cash payments for most Americans.

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Benchmark U.S. crude lost $1.32 to $51.78 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 11 cents on Thursday to $53.13. Brent crude, the price standard for international oils, shed $1.23 to $54.86 per barrel in London. It rose 2 cents the previous session to $56.10 a barrel.

The Associated Press contributed to this report.

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