Apple (AAPL) was the first company to hit a market value of $3trillion in January 2022. However, the market dynamics have changed since then. The same stock has lost around 25% from $182.94 to its current market price of $137.35 as of May 19’2022. The company presently is valued at $2.223T and has been dethroned from the top by Saudi Arabia’s Aramco, which is presently valued at $2.332T. So, what changed for Apple, and why has its share been falling sharply? Will Apple’s share rise to regain the top spot as the most valuable company? So, let’s dive in to explore more.
Why Has The Apple Stock Been Falling?
Recent times have been quite tough for the markets. The current year has been full of economic uncertainties, from Russia-Ukraine geopolitical tension to the present state of looming inflation fears. As a result, the markets have been in sell-off mode, and the tech-laden Nasdaq index has been the worst affected. Even the tech giant Apple has not been spared and has seen a significant correction of 25% from its high. The rising inflation fears, weakening consumer confidence due to chip shortages, and supply chain issues are the reasons for Apple’s sell-off.
What’s The Road Ahead For Apple?
The company’s revenue for the March’2022 quarter was $97.3 billion, with a net quarterly profit of $25 billion. The revenue was up 9% from the year-ago quarter. Similarly, the gross margin rose to 43.7% against 42.5% in the year-ago quarter. Moreover, the operating cash flow was $28 billion in the reported March quarter. Its remarkable cash flow can help the company to endure any slowdowns. In addition, the company repurchased its own shares and paid dividends by spending $27 billion during the March quarter. The company’s every single business grew in the March quarter except for iPads which suffered from chip shortages. The supply shortages and China’s Covid lockdown did cost $8 billion to the company in the March quarter.
Despite supply chain challenges and chip shortages, Apple performed well in the current inflationary situation in the March quarter and managed to have the third-best ever quarter in terms of revenue. Moreover, Apple’s CEO, Tim Cook, had stated that the company’s main focus is to meet global demand by making enough iPhones and Macs, which seems to be a bigger problem than the economic slowdown. With its globally recognized brand, premium profit margins, and wealthy consumers’ interest in its premium products, Apple seems to be a rare company globally, even if it faces the heat of macroeconomic factors.
Can Apple Regain The Most Valuable Company Title?
Saudi Aramco recently dethroned Apple as the most valuable company globally. The company’s stock has risen more than 20% in the last six months. The oil prices have skyrocketed amid the geopolitical tension between Russia and Ukraine. Thus, the company has seen an 82% increase in profits of around $40 billion this quarter from the last year. The countries that have turned away from buying oil from Russia after the Ukraine invasion are buying it from Saudi Arabia. The turbulent times have favored the energy sector, and the commodity outlook has improved.
On the other hand, Apple has faced tough times, with its share falling around 25% from its all-time high in January. Global inflation, supply chain challenges, and chip shortages are the major areas of concern for the company, and the investors have been selling the stock amid all of these.
The economic situation must improve so that the market can stabilize. Apple can easily regain its title once its internal supply chain issues are resolved, and the economic situation improves. It must not be forgotten that Apple was the first to touch a $3trillion market value. Moreover, the businesses of the two leading companies, Saudi Aramco and Apple, are different altogether. The fundamentals affecting each are also different, making the comparison of the two absurd.
The current market scenario is heavily affected by global economic factors, with investors selling their stocks amid inflation fears. As a result, tech stocks are facing the heat, and thus, even Apple has seen a slide down. However, once the economic scenario improves, Apple stock will eventually rise from the present significant correction. Hence, after the stock rebounds, it will be just a matter of time for Apple to regain its crown as the most valuable company.