With Apple (NASDAQ:AAPL) stock making an impressive comeback from the pandemic sell-off in the past few months, here are a few things investors need to know.
Apple stock still spots a 25% upside potential
Apple stock fell in February and March. The coronavirus outbreak threatened the company’s business, especially the iPhone. In February, at the height of COVID-19 in China, iPhone sales in China fell by more than 60%. The big decline in iPhone sales caused some investors to flee Apple. There were concerns that the company’s most important business might be in trouble.
Apple stock has risen by more than 43% from its pandemic lows. The comeback has nearly eliminated the big discount that formed in the stock in the wake of the sell-offs in the past few months. Apple spots a decent upside potential. At $303.74 per share at the closing on Thursday, Apple stock trades at a 7.4% discount to its 52-week peak of $328. At this point, the stock spots a 25.4% upside potential to Wall Street’s highest target price of $380.
Apple adds debt, takes advantage of low-interest rates
Apple wrapped up the March quarter with $193 billion in cash and $110 billion debt, which left it with $83 billion net cash. This week, the company borrowed $8.5 billion to shore up its liquidity. Notably, the timing of Apple’s latest borrowing allowed it to take advantage of the prevailing low-interest rates.
Dividend and repurchases retained despite pandemic
Some companies reeling from the coronavirus have halted dividends and suspended their repurchase programs to try to conserve cash. However, Apple expects to continue delivering dividends to shareholders and buying back shares. In fact, the company’s stock repurchase just got a $50 billion boost, which pushed it back up to $90 billion.
Notably, funds from the latest bond offering will help finance Apple’s stock buyback program and dividends.
Tightens grip on the $96 billion smartwatch market
In 2014, Apple made a leap of faith into the already crowded smartwatch market. Six years down the road, the company dominates the global smartwatch market, which is reflected in Apple stock.
Apple’s stock price was $97.99 when the company unveiled the first Apple Watch product on September 9, 2014. At over $303 per share currently, Apple stock spots more than a 200% gain since the company debuted in the smartwatch market.
The global smartwatch market presents over a $96 billion revenue opportunity.
Services revenue and iPhone launch
Finally, Apple is closing in on its massive services revenue target. The company has reported record quarterly services revenue in the past two quarters. Apple counts on its services business to reduce its reliance on handset sales.
However, the company continues to make efforts to regain its share in the smartwatch market. Last month, Apple released the low-cost iPhone SE, which should be a good fit for the pandemic-hit global economy. At the same time, the company plans to release its first 5G iPhone to catch up with rivals Samsung (OTCMKTS:SSNLF) and Huawei.