Saudi Aramco has overtaken Apple as the world’s most valuable company, underscoring the recent surge in oil prices that have boosted the energy giant this year. Aramco is now worth about $2.43 trillion, compared with Apple’s $2.37 trillion, according to data from Refinitiv
Apple Inc broke records in January with its stock value at $3 trillion, but the iPhone maker has now lost more than $800 billion in capitalization as tech stocks plunged.
With concern growing that the Federal Reserve’s interest-rate increases could tip the US into recession, the $2 trillion milestones is looking precarious. Apple closed last week Tuesday at $2.15 trillion and there are concerns that Apple’s stocks may plunge lower still.
Stock Analysts’ Thoughts.
Over the past three months, analysts have cut their estimates for Apple’s fiscal third-quarter earnings by 7.8%. Revenue projections are down to about 4.2% over the same period.
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The stock also has the lowest share of analyst buy ratings in more than a year.
“In the same way that Apple benefited from the Fed-fuelled bull market, it will suffer as the low-interest rate and quantitative easing subsidies fade,” said David Trainer, CEO at investment research firm New Constructs.
In April, analysts warned that Apple could take a $4-billion to $8-billion hit to revenues for the current quarter
Economists Thoughts
Economists predict the Fed will raise interest rates Wednesday by at least half a percentage point, with some predicting a 0.75-point increase in the wake of recent stronger-than-expected inflation data. Further increases are expected this year. All of that could deepen the selloff in tech stocks, which are particularly vulnerable to higher interest rates as they weigh on the current valuation of companies’ future profits.
Capitalists Thoughts
Key Bank Capital Markets sees signs of softer US demand, citing credit card data spending.
Others have raised concerns about the pace of revenue growth at the company’s App Store, with Morgan Stanley adding that this poses risks to its estimates for Apple’s services business. Apple derived 18.7% of its fiscal 2021 revenue and more than 30% of gross profit from services.
Concerns that FAANG might be losing its dominance in the stock market.
In finance, “FAANG” is an acronym that refers to the stocks of five prominent American technology companies: Meta (META) (formerly known as Facebook), Amazon (AMZN), Apple (AAPL), Netflix (NFLX); and Alphabet (GOOG) (formerly known as Google).
The term was popularized by Jim Cramer, the television host of CNBC’s Mad Money, in 2013, who praised these companies for being “totally dominant in their markets.” Originally, the term “FANG” was used, with Apple the second “A” in the acronym added in 2017.
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The FAANG were poster children of the two-year bull market, rallying at breakneck speed to scale historic valuations. That quickly evaporated this year with the group losing a combined $2.6-trillion in market value as investors fled from growth names for safer assets. Amazon is also close to falling below $1-trillion.
Apple Inc Stock Woes
Apple’s stock woes have intensified this year with a 25% slump and Saudi Aramco snatching its title as the world’s most valuable company. Setting aside the headwinds that have broadly pressured tech stocks rising interest rates, slowing economic growth, and soaring inflation the tech giant is also facing supply constraints related to Covid restrictions in China. In April, it warned that it could take a $4-billion to $8-billion hit to revenues for the current quarter.
Investment Strategist’s Thoughts.
I would say that if an investor under-owns these names, then this is an opportunity to add to positions,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott, which has about $130-billion in assets.
“However, there are always names that lead in some eras, but then it takes years for them to regain their record levels. Just because they will continue to grow, that doesn’t mean these names will regain their former leadership.”
History shows that it can take years for technology stocks to climb back to the highs set in raging bull markets, assuming they ever do. Cisco Systems, a star of the late 1990s tech frenzy, is still 46% below its all-time peak of March 2000.
About Saudi Aramco
Saudi Aramco, officially the Saudi Arabian Oil Company, is a Saudi Arabian public petroleum and natural gas company based in Dhahran.
As of 2020, it is one of the largest companies in the world by revenue. Saudi Aramco has both the world’s second-largest proven crude oil reserves, at more than 270 billion barrels, and largest daily oil production of all oil-producing companies. It is the single greatest contributor to global carbon emissions of any company in the world since 1965. On May 11, 2022, Saudi Aramco became the largest company in the world by market cap, surpassing Apple Inc.