Your portfolios in brief
After hitting its highest-level last January, Apple’s stock has had a rough year, like most stocks from the tech sector. Apple has lost more than 20% since that peak. However, its fall is much less brutal when compared to Netflix or AMD, who have both lost more than 50% since the beginning of the year.
The company disclosed in its quarterly results a year-over-year revenue increase of 8.1% to $90.15 billion, beating analysts’ expectations of 1.38 billion dollars. According to IDC, global smartphone shipments have fallen by 9.7% over the past year, as have PC shipments, which have also fallen by 15%. However, these declines did not affect Apple, as the company reported 9.6% revenue growth in its iPhone segment, reaching $42.6 billion, and a 25.3% increase in revenue from its Mac segment to $42.6 billion. $11.5 billion.
The protests of the past few days at its Foxconn factory could reduce its production by 6 million iPhones pro according to some observers. The factory is responsible for 70% of Apple’s production.
Apple has been trying for several months to reallocate some of its workforce outside of China. Recent supply chain data, compiled by Reuters, demonstrated that Apple’s exposure to Chinese manufacturing has already declined since the coronavirus outbreak in 2020. With the recent protests in China, many analysts believe that this withdrawal should be accelerated. Apple’s global production in China has declined significantly in recent years. Indeed, from 2014 to 2019, China was the main location for 44–47% of the company’s production facilities while these numbers fell to 41% in 2020 and 36% in 2021.
The company currently manufactures the iPhone 14 in India. According to JP Morgan Chase, approximately 25% of all Apple products will be produced in India by 2025. The company is also focusing on product diversification as, for example, services that include platforms such as Apple TV +, music, iCloud, etc. are a rapidly growing segment for the company, which makes it an interesting stock right now.
In short, Apple remains an excellent long-term investment with a price/earnings ratio of 23.5 and a stock that has gained more than 237% over the past five years. Not to mention that the company has a loyal base of consumers who remain extremely loyal year after year. It is here that the word patience takes on its full meaning, while Apple remains a cheap stock right now while in the long term, should offer us rather interesting returns.
Markets in brief
Earlier this week, protests in China sent a wave of concern to markets as investors feared the impact on the Chinese economy. Over the past few days, the country’s zero COVID policy has stirred up crowds demanding a full or partial lifting of health restrictions. The Chinese authorities responded quite violently in order to calm the crowds by deploying police officers who attacked the protestors.
Investors remained cautious at the start of the week, awaiting the numerous economic data published in the middle of the week as well as the speech by the Fed Chairman on Wednesday afternoon. They were, however, encouraged by the published data from “Black Friday” and “Cyber Monday” which show an increase in sales despite inflation and the economic difficulties of consumers. Last year, “Cyber Monday” saw a 1.4% drop as companies worried about a lack of products. On the contrary, this year, companies were managing a surplus of merchandise, allowing them to offer attractive discounts to consumers already struggling with the rising cost of living. This could lead to good earnings of companies from this sector for the next quarter.
Markets were relieved on Wednesday after the Fed Chairman’s speech confirmed what everyone was expecting: a slowdown in interest rate hikes. “The time to slow the pace of rate hikes could come as early as the December meeting,” Powell said, while indicating that “restrictive” monetary policy would remain in place “for some time” to curb inflation which remains “too strong.”
Thus, analysts estimate an increase of 50 basis points at the next meeting in two weeks. “Several points were important in his statement: the more modest rate hikes going forward, their level which will remain restrictive for a while, but he also pointed to the fact that there were fewer job vacancies, which marks a sought-after cooling of the labour market, and above all, he affirmed that a soft landing of the economy was "very plausible,"” summarized for AFP Peter Cardillo, of Spartan Capital.
Wednesday also marked the end of another tumultuous month for the markets. The NASDAQ posted gains of 4.37%, its second consecutive positive month. Then, the S&P 500 and the Dow rose 5.38% and 5.67%, respectively, in November to wrap up their second month of gains for the first time since August 2021.
Friday's jobs report came as a drag on Wednesday's rally. Nonfarm payrolls increased 263,000 in November, well above the 200,000 expected by economists. Markets retreated on the latest data, worried that the Fed would see it as a negative indicator in its next decision. The volatility of the stock market is not coming to an end as every economic or geopolitical news afflicts the markets until we’re able to see consistent data over a longer timeframe.
For some analysts, on the other hand, the markets may have overreacted to the employment data. Many still expect the Fed to raise rates by just 50 basis points. The next decision will take place in mid-December. Until then, markets are likely to continue to be volatile.
Here is the average for the week of the three main indexes at 1 p.m. Friday.
And here's the average for the week for the TSX in Canada.
Pratte Portfolio Management is a firm registered with the Autorité des marchés financiers (AMF) and the Ontario Securities Commission (OSC).
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