Apple Inc. (NASDAQ:AAPL) Stock’s Record Quarter Shows Tech’s Deflation-Beating Power
Investors are piling into Apple (NASDAQ:AAPL), and all of its cloud peers, because in the present market only tech seems to work.
Another record quarter, with net income of $22.2 billion, $4.99 per share, on revenue of $91.8 billion, sent Apple shares up 2% on Jan. 29.
The market capitalization closed at $1.4 trillion. Shares were trading at nearly 26 times trailing earnings, at 5.3 times last year’s revenue.
Why So High?
Tech is working because tech is beating deflation. The new iPhone 11 Pro Max lists at about $1,100 but its parts cost just $490.
Everywhere else, deflation is winning. Oil is down and Exxon Mobil (NYSE:XOM) is dropping with it. It’s now worth 20% of Apple, although Exxon’s revenue is higher than Apple’s. General Motors (NYSE:GM) is worth $48 billion on sales of $147 billion.
Farmers are going broke. Retailers are going under. Bankers are hitting the bricks. There’s a trucking bloodbath.
But tech still works. Money is piling into tech assets like there’s no tomorrow. Visa (NYSE:V) is once again worth more than JPMorgan Chase (NYSE:JPM). Shopify (NYSE:SHOP) is worth $54 billion on trailing year sales of $1.5 billion.
The Weakness of Assets
The problem is that all these numbers — Apple’s value, Visa’s value and Shopify’s value — they’re all asset values. Only a fraction of these values represents money in motion. It is mostly money locked in vaults.
If 10% of Apple shares went on the market today, the holders wouldn’t get $142 billion. An asset’s value is its price at the last trade, multiplied by the number of assets. It’s not as liquid as a stock listing makes it seem.
The New York Mets are selling for $2.6 billion because bad baseball teams are a rare asset. If all 30 Major League Baseball owners tried to sell tomorrow, they wouldn’t get $75 billion for those assets. The same is true for real estate and any other asset.
There is real economic danger in this because money is only money when it’s being exchanged. Money locked in assets is potential buying power. It’s not economic activity. If Aladdin tried to dump all his gold and jewels on the market at once, the price of gold and jewels would plummet. Money is a verb.
Assets are only worth their claimed value if there are willing buyers for them, at that value. Microsoft’s revenue last year was only 40% higher than that of International Business Machines (NYSE:IBM). Yet the asset value of Microsoft is more than 10 times that of IBM. Why? Because Microsoft shares closed Jan. 29 at $168.04 and there are 7.7 billion of them. If all those 7.7 billion shares came to the market today, you might not even get IBM’s market cap of $124 billion.
As MythBusters’ Adam Savage might say, “There’s your problem.”
The Bottom Line on Apple Stock
Tech stocks work because tech companies can hold prices despite deflation, at a time when nothing else can.
Moore’s Law has been accelerating deflation for 50 years, ever since the first microchip, and that’s good. But when that value is locked in assets, when it’s not accelerating real commerce, the economy is vulnerable to a panic.
Asset values can disappear in a flash if those who hold the assets suddenly decide to sell.
Current economic policy doesn’t account for this. The Federal Reserve and President Donald Trump’s administration think we’re all rich, especially if we own Apple stock.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
The projected upper bound is: 335.57.
The projected lower bound is: 314.49.
The projected closing price is: 325.03.
A big white candle occurred. This is generally considered bullish, as prices closed significantly higher than they opened. If the candle appears when prices are “low,” it may be the first sign of a bottom. If it occurs when prices are rebounding off of a support area (e.g., a moving average, trendline, or retracement level), the long white candle adds credibility to the support. Similarly, if the candle appears during a breakout above a resistance area, the long white candle adds credibility to the breakout.
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 29 white candles and 21 black candles for a net of 8 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 79.6086. This is not an overbought or oversold reading. The last signal was a sell 4 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 69.56. This is not a topping or bottoming area. However, the RSI just crossed below 70 from a topping formation. This is a bearish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 0 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 118.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 7 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 5 period(s) ago.
Rex Takasugi – TD Profile
APPLE INC closed down -0.470 at 323.870. Volume was 14% above average (neutral) and Bollinger Bands were 14% wider than normal.
Open High Low Close Volume___
320.543 324.090 318.750 323.870 31,685,808
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 318.06 288.68 231.01
Volatility: 29 23 29
Volume: 34,446,192 29,469,050 27,800,758
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
APPLE INC is currently 40.2% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of AAPL.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on AAPL.O and have had this outlook for the last 112 periods.
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