How to trade apple shares
Apple – the first company to reach a market cap of $1 trillion – has an interesting history. Its shares have captured the public’s attention for decades. We discuss the basics of trading Apple shares.
Understanding Apple: a brief history
Apple Computer Inc. was formed in 1976 by Steve Jobs and Steve Wozniak. Its stock first went public on 12 December 1980 at $22 a share – at which time Apple’s market cap was already $1.2 billion. Less than a decade later, both Jobs and Wozniak left Apple, resulting in the share price dropping to only $2.
It wasn’t until 1997, when Jobs finally returned, that Apple products really started taking off. First came the iMac Power, then the Mac G4 Cube and Mac OS X operating system, followed by the iPod and finally the iPhone.
The stock posted big gains in 1998 and 1999 with the rise of the dot-com boom but crashed again when the tech bubble burst in 2000. By 2003, company earnings skyrocketed, and the share price began a rapid climb to reach $199.83. However, in 2008, a poor forecast caused the price to drop drastically. The price rebounded only to crash again due to the 2008 market meltdown; this was until impressive sales and profit in 2009 put some major force behind the stock.
In 2011, as Apple was still enjoying its flourishing earnings, Steve Jobs resigned due to illness and died a few months later. Tim Cook was appointed as the new chief executive officer (CEO) when the company’s market cap was around $360 billion, and shares were selling for $380. Apple’s biggest feat came in August 2018 when it was the first publicly traded company to ever reach a $1 trillion market cap.
Apple shares: the basics
Apple shares are listed on the US Tech 100 (.NDX) under the ticker AAPL. If you want to trade Apple shares, you need to understand the details of the business, as well as the factors that impact its share price.
Sales of the popular iPhone are said to be one of the main drivers of the Apple share price, but investors are concerned that these sales are dwindling. The smartphone market is saturated, and products are becoming harder to distinguish from each other, meaning users are considering other options. When Apple launched its latest iPhones in September 2018, share prices started to fall. To make matters worse, the company stopped reporting quarterly iPhone and iPad sales, which did not exactly win the public’s trust.
One of the most important factors to keep an eye on in the coming months is Apple’s services. The business has identified services as the biggest growth driver for the next few years as it aims to generate $50 billion in revenue by 2020. Examples of this are its streaming channel and gaming service launches, which could happen as soon as September 2019. The failure or success of these ventures should be an indicator of share price movement.
Apple stock has generally paid shareholders a quarterly dividend since mid-2012. Some investors choose to increase their stake in the company by pushing the dividend back into Apple shares. Furthermore, Apple often buys back its own stock, thereby reducing shares in the market and increasing their value.
Apple’s key personnel: who manages the company?
There are 13 members on Apple’s executive team:
|Tim Cook||Chief executive officer|
|Jeff Williams||Chief operating officer|
|Jonathan Ive||Chief design officer|
|Luca Maestri||Chief financial officer|
|Katherine Adams||Senior vice president (General counsel)|
|Angela Ahrendts||Senior vice president (Retail)|
|Eddy Cue||Senior vice president (Internet software and services)|
|Craig Federighi||Senior vice president (Software engineering)|
|John Giannandrea||Senior vice president (Machine learning and AI strategy)|
|Dan Riccio||Senior vice president (Hardware engineering)|
|Deirdre O’Brien||Senior vice president (Retail and people)|
|Phil W. Schiller||Senior vice president (Worldwide marketing)|
|Johny Srouji||Senior vice president (Hardware technologies)|
Apple also has a board of directors that oversees the executive team to ensure the interests of all stakeholders and shareholders are being served.
What is Apple’s strategy?
Apple is notoriously secretive, so it’s not clear what new products and services it might have in the works. Up until recently, its strategy was primarily to develop existing products. The last major product release was in 2015 with the launch of the Apple Watch. It now focuses on design and functionality differentiation, and hardware-software integration, rather than new product development. In March 2019, Apple announced that its business model is shifting, and it will now put most of its energy into becoming a digital services provider – with the launch of an Apple streaming channel expected in the near future.
Retail and online store expansion is also important to the corporation, because it seeks a high-quality relationship with the customer.
Apple fundamental analysis: how to analyse Apple
Before choosing to trade Apple shares, it’s important to conduct a thorough fundamental analysis. Fundamental analysis is an in-depth method of studying a company’s financials and external factors to gauge the value of its shares. This method often uses various ratios to determine the value of stock and estimate price movements, such as the price-earnings ratio (P/E), relative dividend yield and return on equity (ROE).
Apple’s price-to-earnings ratio
Apple’s P/E ratio is one way to measure its stock value. Essentially, it explains how much you’d have to spend to make $1 in profit. A high P/E ratio – compared to competitors – could mean the stocks are overvalued.
The P/E ratio is calculated by dividing the market value per share by the earnings per share. The earnings per share are calculated by dividing the total company profit by the number of shares it has issued.
Apple’s relative dividend yield
Dividend yield is a company’s annual dividends – the portion of profit paid out to shareholders – compared to its share price. The relative dividend yield is the dividend yield of a single stock compared to that of the entire index – in this case the US Tech 100. To calculate Apple’s relative dividend yield, first calculate its dividend yield by dividing its annual dividend by the current share price. Next, divide the dividend yield by the average dividend yield for the US Tech 100. A low relative dividend yield could suggest that the shares are overvalued when measured against competitor shares.
Apple’s return on equity
Apple’s ROE measures return on assets – it is expressed as a percentage. ROE is calculated by dividing net income by stakeholder equity. A low ROE could be a possible indicator of overvalued shares. That’s because it would show that Apple is not generating a lot of income relative to the amount of shareholder investment.
Join IG Academy to learn more about fundamental analysis.
This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.