2023-08-06 06:48:11
Economic reports said today that investors have largely ignored the problem of valuation of an American company Apple and then in one day, they erased $ 130 billion from the market value.
Despite Apple’s largely expected earnings report last Thursday, investors quickly fled the stock, which fell by more than 4.8% at market close on Friday to $182.
The move wiped out more than $130 billion in market value, more than the combined valuation of all but about 50 US companies.
Apple lost its unique valuation, which exceeded $ 3 trillion, for the first time since last June, but it remains the most valuable company in the world.
It seems that funds and individuals realize that the most valuable American project, and the stock that rose before the new recession by 50% in 2023, is very dangerously overvalued. As the new figures highlight that the strongest company, which was trading at a premium paid by the catalyst for future rapid growth, is now at best achieving near-zero growth, according to Fortune magazine, and Al Arabiya.net viewed it.
“Apple” revenue fell 1.4% to $81.8 billion in a year that began in June 2022. The culprit was hardware sales. iPhone revenue was 2% lower than last year’s levels. Better-than-expected growth in services, including iCloud, Music, and Apple TV+, wasn’t enough to offset device sales.
Chief Executive Officer Tim Cook noted that iPhone sales, which now account for half of all Apple revenue, will continue to decline, while pointing to strength in India and other emerging markets, warning that “the smartphone market is challenging in the US right now.”
Simply put, the only way for Apple to rebrand itself as a growth engine on Wall Street is to grow services so aggressively that the sector’s march forward outweighs the decline in its core franchises. But the services sector still accounts for only a quarter of Apple’s total revenue. The pace at which this sector would have to grow to justify a market cap still close to $3 trillion, and maintain its lead, seems mathematically questionable.
From fiscal year 2018 to 2020, Apple has consistently reported net profits of $14 or $15 billion per quarter. But increased demand for work-from-home equipment during the pandemic pushed earnings to $19.4 billion in the third quarter of 2022, followed by an average profit of $25 billion in the quarter ending March 2023. In the December quarter, the number rose to nearly 30%. $1 billion But even though profits have fallen from the peak in the second quarter and seem certain to continue to decline, Apple’s profit rally has continued to jump to new highs.
At the beginning of 2023, the multiple of earnings per share was about 20 times, and the estimated earnings reached $100 billion, almost double the rate in the 2018-20 period. But by late July, its market capitalization had risen from about $2 trillion at the start of the year to $3 trillion. The multiple earnings per share, or PE ratio, rose to 32 times. Earnings have already started to fall, and then the signs of a major breakaway are emerging.
The earnings report confirmed the downward trend. Net profit was $19.9 billion, down 18% from the previous quarter. The remaining question is whether Apple’s profits can stabilize at a quarterly level of about $20 billion, or about $80 billion annually, or whether it is set to fall further.
Apple shares currently trade at 36 times P/E, which is too expensive for investors who only get a dividend yield of 0.5%. Even assuming that all cash flows were devoted to stock buybacks — a longstanding Apple policy — that would push earnings per share to 3% annually, which isn’t enough, according to a Fortune analysis. In order for shares to become attractive for buying again, even if they continue to generate profits of $80 billion annually, their price must drop a lot.
Analysts estimated that if the services sector could not compensate for the decline in product sales quickly enough, profits would continue to decline, and the future for the most valuable company in the world could become even bleaker.
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