Apple’s $2-trillion market valuation on shaky ground

“In the same way that Apple benefited from the Fed-fuelled bull market, it will suffer as the low interest rate and quantitative easing subsidies fade,” said David Trainer, chief executive officer at investment research firm New Constructs.

Economists predict the Fed will raise interest rates Wednesday by at least half a percentage point, with some predicting a 0.75-point increase in the wake of Friday’s stronger-than-expected inflation data. Further increases are expected this year. All of that could deepen the selloff in tech stocks, which are particularly vulnerable to higher interest rates as they weigh on the current valuation of companies’ future profits.

The FAANG cohort — Facebook owner Meta Platforms Inc., Apple, Amazon.com Inc., Netflix Inc. and Google parent Alphabet Inc. — were poster children of the two-year bull market, rallying at breakneck speed to scale historic valuations. That quickly evaporated this year with the group losing a combined US$2.6 trillion in market value as investors fled from growth names for safer assets. Amazon is also close to falling below US$1 trillion.

Analysts have grown cautious, too. Over the past three months, they’ve cut their estimates for Apple’s fiscal third-quarter earnings by 7.8 per cent, according to data compiled by Bloomberg. Revenue projections are down about 4.2 per cent over the same period. The stock also has the lowest share of analyst buy ratings in more than a year.Article content

KeyBanc Capital Markets sees signs of softer U.S. demand, citing credit card data spending. Others have raised concerns about the pace of revenue growth at the company’s App Store, with Morgan Stanley adding that this poses risks to its estimates for Apple’s services business. According to data compiled by Bloomberg, Apple derived 18.7 per cent of its fiscal 2021 revenue and more than 30 per cent of gross profit from services.

Good. Again, go woke go broke.

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