Apple – on Thursday – lost its $1 trillion valuation for a short time after its shares dropped 7% following a weak outlook.
Despite the drop and weak outlook, Apple’s stock is the top choice of most investors and analysts.
And, if past returns are anything to go by, investors can still expect handsome returns from this 40-year-old company.
Apple’s stock – then and now
Talking of the past performance, those who invested in Apple in its early days would have made a fortune by now provided they were not tempted to sell their stock somewhere in between.
According to the calculations by CNBC, $1000 invested in Apple’s IPO in December 1980, would be worth over $500,000 now. The calculations include price appreciation and dividends.
Apple was founded in 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne, with Wayne leaving the company just weeks later.
Apple’s first customer was The Byte Shop, a Bay Area computer store, which ordered 50 Apple I computers. Jobs took a $15,000 loan to complete the contract. In June of the next year, Apple released the Apple II.
Apple went public in December 1980 offering 4.6 million shares at $22 each. The IPO was well received, and the stock closed 30% higher on the opening day.
Currently, Apple’s stock is trading around $210.
Another interesting fact about the IPO was it created over 300 millionaires in a single day. According to EDN, the IPO created “more millionaires than any company in history had produced.”
Many of those millionaires were Apple employees, including Jobs who made more than $200 million.
A trillion dollar company now
Fast forward to 2018, Apple in August became the first public U.S. company to hit a $1 trillion market cap. Apple’s journey, however, hasn’t been smooth.
It was on the verge of bankruptcy in 1997, but somehow, Jobs managed to steer the company from those days along with revolutionizing the technology market with products like the iPod and iPhone.
Apple now has $237.1 billion in cash on hand. In the last quarter, the company reported $243.7 billion cash in hand.
Apple’s cash holding has always lead to M&A speculations. Though the company keeps on buying smaller companies from time to time, it lately spent its cash on content creation, emerging markets and creating jobs in the U.S.
Earlier this year, Apple even said that it would contribute $350 billion to the U.S. over the next five years.
Apple’s contribution will partly be in the form of taxes on the cash that it plans to bring back from overseas.
Apple also committed to creating 20,000 new jobs in the U.S., and a new campus as well.
What to expect now?
Apple, on Thursday, reported that its revenue jumped by 20% to $62.9 billion year-on-year, while profits rose by 31% to $14.1 billion. The increase in revenue despite relatively flat sales can be attributed to Apple’s strategy of charging more for its phone.
However, Apple’s stock dropped after the company revealed that it would no longer reveal the number of units sold.
Investors took this as a possible hint of weaker sales in the coming months. Apple, on the other hand, defended its decision, saying the numbers are now not a good indicator of Apple’s financial position.
“I can reassure that it is our objective to grow unit sales for every product category that we have,” Apple’s CFO Luca Maestri said during the earnings call. “A unit of sale is less relevant today than it was in the past.”
Apple also provided a disappointing forecast for the holiday quarter. For the quarter ending 31 December, the company expects sales of $89 billion to $93 billion.
Wall Street is expecting sales of $93 billion. In the same quarter last year, Apple posted sales of $88.3 billion.
Defending the not so encouraging forecast, CEO Tim Cook said the company is facing “macroeconomic weakness in some of the emerging markets” like Turkey, India, Brazil and Russia. Cook also partly blamed currency fluctuation.
Further, Maestri added that Apple is facing some supply uncertainty for its latest products.
Apple depends on China for its production needs, but the ongoing trade war between the U.S. and China has led to some uncertainty over Apple’s performance.
Though so far Apple products have been spared from tariffs, if the tension escalates, Apple products could get dragged in.
Cook, however, is optimistic that the nations will resolve the disputes soon.
6 Money Saving Tips For Millennials
Millennials make up approximately 25% of the total population in the United States and they are now larger than the Baby Boomer generation.
This has welcomed a new trend—increased spending. The spending power of Millennials is estimated to reach a whopping $3.39 trillion by the end of 2018. A higher education level and more spending power haven’t yet translated into financial literacy.
As financial literacy is not taught in schools, most individuals grow up having no idea of investing and saving options. Most millennials will soon have to start making life decisions—whether it is to buy a home or start a family.
They need to find a way to overcome mounting student debt, skyrocketing rents, a saturated job market, and stagnant wages, while saving enough for retirement.
Sounds tough? Sure. But you need not worry. Here are six financial tips that will help millennials save a few bucks—all the while maintaining financial discipline.
Getting Plenty Of Financial Advice? 5 Money Rules You Can Ignore
Today’s millennials aren’t big fans of debt. Unlike the baby boomers, young adults today are straddling massive financial pressure – be it heavy student loans or home prices reaching unaffordable highs. While all of this welcomes plenty of financial advice, most of them are wrong. Here are five pieces of money rules you can afford to ignore.
1. Buy A House ASAP (And Not Rent)
With home prices almost doubling and trumping inflation and pay, buying a house could lead to a nightmare if you’re taking out a mortgage before your income allows you to afford one. A better option would be to rent until you have enough funding to put down 20%, while taking care to not make payments that are more than 30% of your total income.
2. Ditch Your Credit Card
While this might be popular financial advice from the older folks, getting a credit card that comes with a low annual fee can help you immensely – if used right. What’s more, it comes packed with perks like reward points, cashback, mileage for travel, and can help you meet a large unexpected cost.
3. Pay Down Debts With The Highest Rates
It might be tempting to tackle the biggest debt of the lot and let the smaller ones slip down your priority list. The trick here is to focus instead on paying off your smallest of debts with every dollar you can afford – once it’s paid off, roll over to paying off the next one, until you’re debt-free.
4. Start Saving For Your Retirement (Right Now)
Despite the upside to saving for your retirement now, millennials might often find money too tight. For folks who are just out of university, a wiser option would be to aggressively pay off your debts instead. Although, here’s a caveat – IF your employer offers a retirement contribution match, invest just enough to get that perk (It’s free money!).
5. Buy Yourself A Car
With the shared economy on overdrive, there are plenty of options ranging from car rentals to ride-hailing services. Pumping your money into buying your car could also demand more of your savings for repairs and maintenance – funds you can use to pay off other expenses with. The opportunity cost isn’t worth it if you haven’t got enough financial cushion to meet your important expenses.
Why You Need To Bag Muni Bonds For High-Yield Tax-Free Returns
With many investors taking to the stock market or making do with scraping a meagre 2% yield off their 10-year Treasury bills, most miss out on including a far better option to their investment portfolio – municipal bonds. What’s exciting about this asset class? They come packed with significant tax advantages, and yield returns that are over 6% to the investor. Here’s a short, somewhat helpful video on how municipal bonds work:
Muni bonds have been the safest bet when investing in bonds – their default rates at 0.2% for years are almost miniscule when compared to the volatility that the equity market flirts with. Earlier this year, a new federal tax law enabled improved tax deductions on federal returns. This drew many to bank on municipal bonds since it fit the tax-free bill. The interest income you receive on muni bonds is not subject to federal taxes, plus it is exempt from local taxes if it was issued within your state. The cascading gains you make can be dramatic.
The best way to tap into muni bonds are through a bond fund. Within a regular bond fund, you get to pick amongst mutual funds, closed-end funds and exchange-traded funds (ETFs). Beyond these classes, you would also have to consider factors such as your investment horizon and cash flow requirements. Here’s a post that explains the calculations that go into muni bonds and other considerations to look at when making the investment. Better yet are the projections – nearly $51 billion in reinvestment demand is expected this month, which would sweeten the deal for municipal bond holders.