Why Apple Inc. (NASDAQ:AAPL) Stock is DroppingDate Published: 2016-11-14
Author: Ophir Gottlieb
Written by Ophir Gottlieb
Apple Inc. (NASDAQ:AAPL) stock has suddenly shed $50 billion in market cap since the election, and this is why it's happening.
Apple Inc. (NASDAQ:AAPL) saw a mighty stock bounce once we learned that earnings were better than expected last quarter and more importantly, that actual growth would return by this quarter and moving forward.
That, together with the highly anticipated ten-year anniversary iPhone 8 and a booming Apple Services segment had investors hungry for what appeared to be one of the few technology giants with a modest valuation. But right now, the company's future is mired in the murky waters of a political vacuum.
President elect Trump had some tough talk surrounding imports, but especially surrounding China. His rationale is based on the reality that China places import tariffs on many U.S. goods (U.S. autos imports have a tariff of around 20%, to help protect Chinese carmakers, for instance), while in response the United States has import duties, but not as punitive.
In a rally held on August 24th, Trump made some clear statements:
CHINA FIRES BACK
Today China has fired back, and in a rather scary move, specifically named Apple Inc. (NASDAQ:AAPL) and a few other companies and commodities. Here is the response:
APPLE INC. AND CHINA, AGAIN
Famed billionaire investor Carl Icahn withdrew a multi-billion position in Apple Inc. stock earlier this year stating his concerns over the risk in China -- specifically how the communist regime was starting to aim rather accurately at the iPhone and it had gotten very contentious.
We have a full CML Pro dossier that discusses the risk, step by step, in great detail, here: Risk Alert: Apple Faces China's Wrath.
It doesn't actually matter whether we believe the next U.S. administration will in fact follow through on campaign trail promises. What does matter is that a new risk, or an old risk renewed, is here. Higher risk requires the expectation of higher returns or the investment is no longer as attractive. The question to answer is whether or not Apple Inc. (NASDAQ:AAPL) is still a good investment with respect to that risk-reward tradeoff.
The author is long shares of Apple Inc. (NASDAQ:AAPL).
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