Good or bad? The Stock price says good. Very good. A four for one stock split. That's what pushed the market cap up toward just below $2T. That's old news. Honestly, I just can not believe how much news can hit the tape concerning just one firm, even if that firm is Apple (AAPL) . By the way, my hat is still off top those of you have owned this name and not traded. I have had to sit in the corner wearing the "dunce cap" over that one.
Hot News
It's been a couple of weeks since that split was announced. It's been a couple of weeks since Apple topped fiscal third quarter earnings expectations. The stock is up a rough $100 since then. I saw the shares trading in extra-hours (45 minutes ahead of the bell) with a $460 handle. There is just so much to unpack here. Some of it is actually not positive. Yet every manager on the Street seems to need more... and then more. All-time high? Just buy it. That appears to be the strategy. By the way, a tick at $446.77 will place the market cap at a cool $2 billion.
Very interesting, and potentially very positive would be the report that first surfaced at Bloomberg that Apple plans to bundle up on the already rapidly growing services side of the business under a new brand name, "Apple One." The bundles, which launch in basic form as soon as Monday, will be tiered, and save consumers more money, the more they subscribe. We are told that the first tier would just include Apple Music and Apple TV+. I would think that a shot across the bow at not just the various streaming services, but pretty clearly Amazon (AMZN) as well. Word breaks that Apple TV+ will itself bundle with CBS AllAccess, a ViacomCBS (VIAC) offering, and Showtime.
To further entrench consumers in the Apple ecosystem, such services as Apple Arcade, Apple News, and increased iCloud Storage space can be added for a bundled price discounted to the a la carte aggregate. The services based idea that really made news on Thursday was an entry into virtual fitness classes, potentially targeting market share currently belonging to the likes of Peloton (PTON) , Nike (NKE) and others. Remember, the idea is to have all of this in place by the Autumn (probably October this year) launch of the iPhone 12.
Not Such Hot News
Scuttlebutt has it that the president's executive orders against TikTok (owned by ByteDance), and WeChat (Tencent: TCEHY) may have to be broader. The Chinese smartphone market is worth a rough $44 billion to Apple. Some estimate that removing WeChat alone, Apple products could result in a more than 25% reduction in annual shipments. The broader this ban, the higher that estimate. Understand?
No sooner does this story break, and the one involving Epic Games, creator of the well known Fortnite game. Epic apparently enabled something along the lines of in-app payments that were not reviewed by Apple, and the app was removed from the Apple app store. (I am reading this, I really hope my apps download and work when I add them, and I don't "game", outside of Strat-O-Matic Baseball and Chess, so some of this is foreign to me.) Long story short. It looks like Epic seems to have a similar problem with Alphabet's (GOOGL) Android app store and is now suing both firms.
Brother, Can You Spare $5.5 Billion?
Apple needed to go to the bond market to raise cash? Did they not just tap these markets for a cool $8.5 billion back in May? Uhm, no to the first question. They don't need the cash. Yes, to the second question. Apple has "just" $194 billion in cash, cash equivalents, and marketable securities as of quarter's end. Might as well get, while the getting is good. Might as well stock up on dough if the dough is almost free. Both Amazon and Alphabet (hardly paupers) have recently tapped capital markets, as has Ball Corp (BLL) just this week for a $1 billion.
Apple borrowed $5.5 billion across maturities of 5,10, 30, and 40 years. Even at the longer end, these securities will yield just a bit more than a full percentage points above US Treasuries. How does one say no? The proceeds will be used for general corporate purposes that will include both buybacks and dividends. Huzzah.
What Do I Think?
I would love to be long Apple long term. I have, however, played the game instead of just tucking the shares under the bed and pretending they don't exist. Don't cry for me. I still made money trading the name, I just did not ring the bell the way the buy and hold crowd has in this one. I am also in several funds that own the name, so not a complete swing and miss. Certainly better than losing money.
Valuation for this name has evolved over time, from that of a purveyor of hardware, to a seller of software services that can use the popular hardware as a means to keep loyal customers captive. This creates a playing field conducive to regular recurring revenues. Hence, the bundles. I believe that I will buy these shares cheaper. I have been wrong about this a few times in a row now, so be cognizant of my less than spectacular batting average in this name over the past couple of months.
I believe that many small investors as well as a number of managers have reacted to the news of the stock split aggressively, as they have in Tesla (TSLA) . The stock will split for shareholders of record on August 24th, and will trade split adjusted on August 31st. Know what? I'll see you in September. I will be long this name again. After the split. Before the iPhone 12.
(Apple, Amazon, and Alphabet are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
