King Apple Has Lost Its Stock Market Crown — What’s Next?

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The symbol is striking. For a few days now, Apple is no longer the world’s largest market capitalization. The iPhone maker has given up its crown to the oil giant Saudi Aramco:

Apple’s share price has lost 12% in one month. This discount made the value of the Apple group fall below 2.400 billion dollars on the markets for a few hours. While the progression of the Saudi group allowed him to cross it. This is not the first time that Apple loses its crown of the king on the stock market.

During the historic IPO of the world’s largest oil company at the end of 2019, Saudi Aramco had already briefly settled on the throne, which Microsoft had also occupied in the previous months. But Apple’s extraordinary performance — especially during the pandemic — had allowed it to regain its title.

Apple had conquered it back in 2011, overtaking another oil company, Exxon. The Apple group has practically monopolized it since then, breaking through the stock market’s ceilings one after the other. The first company to exceed $1,000 billion in capitalization in the summer of 2018, it doubled the stake just two years later and remains to this day the only one to have exceeded the $3,000 billion thresholds in January 2022.

But the first five months of 2022 have been cruel. Apple stock has lost more than a fifth of its value. In the last two weeks, $200 billion in capitalization has vanished.

What has happened to make the market darling lose so much? Apple is of course caught up in the stock market tornado, which is sweeping away the world’s tech industry against a backdrop of rising inflation and central bank interest rates — while Saudi Aramco is benefiting from soaring energy prices in the wake of the war in Ukraine.

But the market star also has its own set of setbacks, mainly because Apple is far more exposed than other GAFAMs to the situation in China. China is indeed its main production country, but also one of its biggest markets, with about 20% of the group’s revenues.

Amid growing supply chain constraints due to the changing geopolitical environment, shortages of electronic components, and strict confinements in China, Apple anticipates that its revenues could be cut by $4 billion to $8 billion in the current quarter.

This slowdown comes at a time when the iPhone renewal supercycle is set to slow down. It had allowed the Cupertino group to sell 233.9 million phones in 2021:

Illustration by Sylvain Saurel

Estimates for 2022 are around 200 million, just below the 2020 level. That year, Apple sold 206.1 million phones.

What’s next for Apple?

All investors are now wondering what can be next for Apple.

The first thing to note here is that the extraordinary growth in service revenues (App Store, Apple TV+, Apple Music, iCloud, …) is a comfortable buffer to the group’s difficulties in selling iPhones. Service-related revenues accounted for more than a fifth of revenue for the first time in Apple’s history in Q4 2021.

On the other hand, Apple has more than $190 billion in cash.

So Apple has plenty of room to mitigate any shareholder disappointment from this slowdown and the possibly difficult months ahead. The firm led by Tim Cook is used to massive share buybacks.

Finally, many observers are already salivating at the idea of Apple taking advantage of the tech crisis to buy a company like Peloton, which has lost half of its value on the stock market, or why not even Netflix, which has lost two-thirds of its value in recent months.

Questioned on the subject at the end of April 2022, Tim Cook did not exclude the possibility of major acquisitions in the coming months, but without saying more. Investors will have to be patient and continue to support Apple. This is his message in substance.