Apple
One year, 83.51% returns, going from $157.92 on January 2 to closing at $289.80 today, Apple has had a good year. One single firm added $530 billion to itself in market cap.
The world’s most valuable technology company saw an unprecedented rally this year, creating over half a trillion dollars in value for shareholders. We saw a newer version of almost everything the company makes this year, ranging from the new iPhones and AirPods to the MacPro for professionals.
This feat is nothing short of amazing, given that the stock has beat the S&P, Dow, or any other index for that matter by a huge margin. Here are what I think were the major factors that led to Apple’s market-beating performance:
- Trade War: I’ve written about the trade war extensively here, and now that the Phase One deal is signed, we can expect to see lower tariffs and duties on imports. China is one of Apple’s major manufacturing hubs, and a deal gone sideways would’ve hurt the firm and the American consumer. A signed deal coupled with strong demand in China created the ideal macroeconomic conditions that set the tone for Apple’s rally.
- Underpromise and Overdeliver: Earlier this year (in January), the firm shocked the markets when it announced that it is cutting its revenue and profit forecasts for the year. For the first time in a decade, Apple lowered guidance to tread on the safer side of the trade war. Fortunately, the firm beat market expectations in virtually every quarter of the year and easing trade tensions in the latter half of the year added to the firm’s expected profitability.
- Diversified and New Product Lineup: Not only did Apple launch refreshed models of the iPhone, Apple Watch, MacBooks, but also fixed major issues (keyboard, touch bar, escape key, display, processing power) with the MacBook Pro. Moreover, we saw a “pro-model” of popular AirPods that offered noise-cancelling and a custom fit. Finally, the fact that iPhone 11 was the “budget-friendly” model of the “Pro” version, made it easier to like and buy for consumers, without sacrificing all of the features of the Pro.
- Services: This was Apple’s major bet this year, and the firm not only updated its streaming platforms for Podcasts and Music, but also entered the streaming marketplace. While the firm is competing with Netflix, Prime Video, and Disney Plus to gain market share, quality production was seen in shows like “The Morning Show” and “See” on Apple TV+.
In short, Apple is now providing (a) the technology that enables media and content creation, (b) the product(s) that enables media consumption, (c) and the platforms that offer said media. With News, Music, and Apple TV, there is no shortage of the kind of content you can exclusively consume on Apple devices.
In comparison, Microsoft has gained nearly 55% this year, and Amazon has gained about 23%.
It’s time to wait for Apple’s first-quarter earnings in 2020, where we will see in numbers the degree to which the hype around new products is real. The holiday season saw a lot of Apple products on Amazon wishlists, and who doesn’t like a shiny new iPhone? Here’s what the street expects:
- Earnings growth - 8%
- Revenue growth - 4.5%
- New iPhone units sold - 66.7 million
Moreover, we will also see some numbers for the performance of Apple's new streaming platform, which is likely to give us insight into how much of a market it has tapped into.
If you’d invested all of your money in the S&P 500, you’d be up 30% this year. But if you’d invested all of your money in Apple Stock, despite the trade uncertainty and lowered guidance earlier, you’d be up 83% this year.
But not everyone made 83% in returns this year, and that’s ok. It’s ok because investing is hard, and it is easier to look back on a company’s performance and say “I wish I’d done that” than to look at a company’s performance now and bet on how good you think it might do in the future.
This is the reason why identifying the right strategy and sticking to one that works for you is essential for investing success in the long run.
Spotify
Spotify has joined the likes of Twitter in ensuring that it separates itself from US politics. How? Well, like Twitter, Spotify will ban political ads on its platform.
Starting early 2020, the firm will no longer allow political parties to spend a part of their ad budget to run ads on Spotify. For Spotify, this is a “pause” rather than a permanent ban, and the firm may “resume” selling political ads in the future.
“At this point in time, we do not yet have the necessary level of robustness in our processes, systems and tools to responsibly validate and review this content,” the Stockholm-based company said in a statement. “We will reassess this decision as we continue to evolve our capabilities.”
What this means for the 2020 Presidential election in the US, is that their only source of spending ad money is now on Google and Facebook Ads. While spending on Google Ads is likely to redirect users to websites, chances are that the major proportion of a campaign’s digital budget is likely to be spent on Facebook Ads, given that its a social media platform.
It’s uncertain at this point to say the degree to which this will affect ad spend by parties, but it will certainly make advertisements more directed. I doubt Facebook will join Twitter and Spotify to ban political advertising, simply because adspend is a major source of its revenue and income for the firm.
For Spotify, there is likely to be a hit on revenue, but the impact will be minimized given that the majority of Spotify’s revenue comes in from Premium Subscriptions. For twitter, the hit on revenue is likely to be more severe because its the social platform where news breaks first, and politically involved citizens are likely to be more active.
The stock closed at $153.17.
Tesla
Tesla will start delivering the first batch of cards built in China on Monday.
The first 15 units of Model 3 have been assembled at Tesla’s Shanghai plant and will be delivered to employees on Dec 30. The latter half of this year bore good news for the firm. It began when the firm posted a surprise profit in third-quarter results and announced the new gigafactory in China.
On top of this, the Chinese government seems to be giving Tesla a break because Model 3 is now a vehicle that is exempt from a 10% purchase tax.
The stock closed at $430.38, closing at a price almost double of what it was in June this year - $196.59.
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