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Here’s How Apple Can Clinch A $2T Market Value

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On Aug. 2, 2018, Apple [AAPL] created history as it became the first company in the United States to be valued at $1T as per market cap. Apple’s market cap rose to a high of $1.10T and has since slipped to its current valuation of $996.3B.

Despite the recent slide, Apple shares are up 25.5% in 2018. Now that it has crushed the $1T barrier, what’s next for the tech heavyweight? What will be the next revenue driver for Apple? Can the company be valued at $2T? Analysts definitely think so.

 iPhone growth might slow down

Apple’s stock was trading at $13 in Nov. 2008. The stock has since risen 1500% driven by the launch of Apple’s flagship product the iPhone as well as the hugely successful iPad. The global exponential growth in the smartphone industry created robust demand for what soon became Apple’s flagship product.

Now, this growth has stalled. The smartphone market is a mature one. Emerging markets like India will drive demand but the iPhone is too expensive for these markets. The iPhone has lost market share to Chinese companies such as Huawei, OPPO and Xiaomi.

Apple’s iPhone still accounts for over 59% of total revenue. In the recent earnings call, Apple CEO Tim Cook stated that the company will no longer publish device sales going forward. Is this an indicator of slowing demand?

Apple though remains an innovative company and allocates significant resources to research and development. It has time and again proved critics wrong especially over the last decade. Apple still remains a good long-term bet for investors. Let’s see why.

Apple’s Services business critical for the company

Apple’s Services business has been a major revenue driver for the company over the last several quarters. It accounted for 16% of total revenue in the last quarter and is as big as a Fortune 100 company in terms of revenue.

This business includes revenue from  Internet services, AppleCare, Apple Pay, licensing and other services. The App Store, Apple Music and Apple Pay are all set to experience significant growth over the next few years.

Apple Music has already become the second largest music streaming platform in the United States, while the App Store generated 93% more revenue than the Google Play Store [GOOG] in the last quarter that has a far larger user base.

Apple has created a technological ecosystem with a high customer satisfaction and retention rate.

Apple Car rumored to launch by 2023

Noted Apple analyst Ming-Chi Kuo expects the company to launch the Apple Car by 2023 that will push it towards the next trillion dollar valuation. Kuo stated that Apple’s high growth services segment, AR futures, and its secretive car project (also known as Project Titan) will propel it towards a $2 trillion valuation.

This means Apple is looking to take advantage of the tectonic shift in the global automotive market. Several countries are already eyeing investments in the electric/hybrid car space as they are running out of options to combat global warming and climate change. The electric car is a terrific alternative and companies are now pumping money into this space.

Kuo stated, “Apple’s leading technology advantages (e.g. AR) would redefine cars and differentiate Apple Car from peers’ products. Apple can do a better integration of hardware, software, and service than current competitors in the consumer electronics sector and potential competitors in the auto sector.”

The $2T valuation seems like a distant dream for investors, especially in a difficult macro environment with trade wars, slowing demand, and rising interest rates. Apple though has always been able to catch the consumer’s attention with its high-end tech products and services. If the Apple Car experiences a successful launch, there will be no stopping this stock given the total available market.

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Early Uber Investor: ‘I’m Happy With Uber’s Poor IPO’

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Lance Armstrong may not have gotten his $3B on his $100K investment, but his $100K still got a proper HGH/steroid boost.

And despite the rough outing, early investor Mitchell Green says he’s happy with the current IPO price—despite falling WAY south of its initially rumored $120B level.

And no, it’s not the Mitch Green, the one who got into a street fight with Mike Tyson.

Image result for mitch green gif

Uber rich Mitch Green looks like this:

Image result for mitchell green lead edge

Anyway. Green says he’s happy with the current pricing. Check out the video to see why.

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‘Going Public’: IPO, Explained

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It’s a buzzword we hear constantly—and one that’s sure to generate tons of headlines. Alibaba had the largest in history (before its billionaire founder decided he wanted to quit to be a grade school teacher.)

Lyft IPO’d recently also, beating arch rival Uber to the proverbial punch.

Other than being a buzzword and a big story, what exactly is an IPO?! Well, let’s break it down.

What is an IPO?!

In technical terms, an Initial Public Offering (IPO) is the first sale of stock issued by a company to the public. In other words, this is the moment when a private company goes “public” by offering its shares for sale to the public.

So when a company does go public, the valuation usually spikes dramatically—and the company can now use the funds from the sale of shares to feed the business. It’s a fabulous funding source for a company.

Before that, what is a company?

Prior to going public, a company is a privately-owned firm. Obviously. The company initially attracts investments or seed capital from the co-founder, friends, and families.

Business investors such as venture capitalists, private equity companies and angel investors pump in money if they are optimistic about long-term prospects and sustainability of the company.

On the flip side of things, you sometimes have companies that decide to go “private,” like Elon Musk said he wanted to do with Tesla. 

Why does a company opt for an IPO?

The biggest advantage for a publicly listed company is access to capital. This capital can be used to purchase machinery, fund research and development or pay off any existing debt.

The firm will then be listed on a public exchange and provides an exit route for business investors and founders.

When Facebook went public, Mark Zuckerberg sold 30M shares worth $1.1B. An IPO is the most common way for investors and VCs to make a significant return on their investment. In fact, it’s considered the ultimate exit for founders.

How much capital do the companies get?

Let’s run down the list.

Alibaba [BABA] raised $25B in an IPO back in Sept. 2014. Facebook [FB] raised $16B in May 2012. Visa [V] raised $7.9B in March 2008.

Top tech unicorns such as Uber, Slack, and Airbnb are on course to file for an IPO over the next 18 months.

The company that is looking to go public hires an investment bank to underwriting the IPO process. Investment banks can either work together or individually in this process.

What do the investment bankers do?

In other words, all the boring admin stuff. In exchange for this, they collect a nice fat fee, usually anywhere from 4-7% of gross proceeds.

Those involved hold several meetings to finalize the IPO process and determine the timing of the filing. Once this is wrapped up, they shift to performing the due diligence to ensure the company’s registration statements are accurate.

The due diligence tasks include market due diligence, legal and IP due diligence, financial and tax due diligence. At the end of this process, the companies then file for an S-1 Registration Statement.

The S-1 is usually what tips off the press and the public that a company is about to go, well, public.

And what’s the S-1?

The S-1 statement includes information about the companies’ historical financial statements, company overview, risk factors, and other critical data.

A pre-IPO analyst meeting is then held post the S-1 Registration Statement to educate analysts and bankers about the company.

Confused yet?

A preliminary prospectus can also be drafted at this stage. The underwriting investment bank conducts pre-marketing to determine the interest of institutional investors and the price they are willing to pay per share.

Now you’re ready to go public

The price range for an IPO is set and the S-1 Registration Statement is amended with the price range.  The company’s management organizes road shows and marketing activities to generate interest for the upcoming IPO.

Based on investor interest, the price range per share can be revised. The investors will apply for company shares and this application window is open for generally 2-4 days. The company shares can be oversubscribed or undersubscribed.

Once the IPO is priced, the investment banks will allocate shares to investors where the stock will now be available for trading in the secondary market.

At this point, a company is now ready to go public. Here’s how people usually look when that happens.

Image result for snap IPO

SNAP executives during happier days.

Congrats. You’re now an IPO expert.

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[VIDEO] Penny Stocks, Explained

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Penny stocks are equity investments that are traded outside major exchanges. These stocks are traded at low prices and have a small market cap. As penny stocks are illiquid and highly speculative, they carry a high risk of investment.

The US Securities and Exchange Commission (or SEC) defines penny stocks as shares with a value of less than $5. Typically, a penny stock is traded over the counter or by using pink sheets.

Despite the high risks of investment, penny stocks can be a lucrative form of investment because of its low price and higher prospects of return.

Suitable for investors with a high-risk tolerance

Investing in equity markets is risky, particularly because it’s driven by price fluctuations and volatility. Investors in penny stocks will generally have a higher threshold of risk tolerance. Penny stocks are far more volatile than blue-chip stocks.

Investors hence need to take precautions while investing in penny stocks. They need to have a stop-loss order prior to entering into a trade. This will minimize the amount of downside potential in case the markets move in the opposite direction.

Penny stocks also provide an opportunity for significant companies. These companies are generally high-growth ones but with limited cash resources.

Why are penny stocks attractive to the average retail investor?

Generally, the average retail investor associates a low price stock as a bargain. But this cannot be farther from the truth. A stock can be overvalued at $1 and can be undervalued at $250.

The average investor fails to understand this due to limited investing knowledge. Penny stocks are trading at lower values for a reason. They might experience a bull run resulting in a significant price appreciation but can also come crashing down in no time. It is far easier to manipulate penny stocks.

The “Caveat Emptor” principle should be applied when investing in penny stocks. Sure, there are success stories even for penny stock investors, but is worth the risk?

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