After a couple of years in the doldrums, shares of Apple (AAPL) are finally on the rise again, adding $100 billion of value in three months thanks to renewed excitement about the iPhone, as well as some savvy financial moves.
Apple’s stock, up 20% in the past three months, rose to more than $630 on Thursday. That's the highest level since the fall of 2012, when the stock reached its all-time high of $705.07.
There are multiple causes for the latest rally.
Apple is proving it can increase sales of the iPhone, its biggest profit engine, even without another earth-shattering new product. Also, CEO Tim Cook listened to the demands of activist investor Carl Icahn and others by agreeing to buy back more shares and pay higher dividends with Apple’s huge $160 billion stash of cash. And this week’s acquisition of Beats Electronics could help restore growth in Apple’s stagnant music business.
On a psychological level, investors also seem pleased with Cook’s decision to split Apple shares seven-for-one, which has no real economic impact but will lower the price per share from the current level to about $90. The record date for the split takes effect after the market closes June 2; trading on a split-adjusted basis begins June 9.
The stock rise began in late April when Apple reported much better than expected iPhone sales for the first quarter. The sales number of almost 44 million was both 6 million more than a year earlier and 6 million more than Wall Street expected.
Most analysts were forecasting a blasé quarter, since the company hadn’t introduced any new products, setting the stock up for a strong gain when results exceeded expectations.
Strong push overseas
Global growth in sales of high-end smartphones has slowed, especially in the United States and Europe, while growth of cheaper models running Google's (GOOG) Android software has accelerated. That seemingly should have hurt Apple, but a strong push in China, India and other developing markets to sell older, lower-priced models offset any weakness at the high end.
Sales could get a further boost later this year when Apple is expected to unveil new iPhone models with larger screens, another popular segment of the market that Apple has previously ignored.
The new iPhones, expected to be released in September or October, come at an opportune time for Apple, according to UBS analyst Steven Milunovich. Surveys show more than half of current U.S. iPhone owners are due for an upgrade in the next 10 months. “The timing of a new form factor meshes with a large number of phones ready for upgrade,” Milunovich wrote in a report on Thursday.
Investors are also excited about various leaked future software features, some of which could be announced officially as soon as next week. Apple kicks off its annual World Wide Developers Conference, or WWDC, in San Francisco on June 2. Apple typically uses the venue to unveil new software for iOS, which runs on iPhones and iPads, as well as the related Mac OS, which runs on Macintosh computers.
Among the leaked new features, Apple is expected to announce software to track vital signs and help with fitness along with a major push to put the iPhone at the center of the growing home automation industry.
Sounding supremely confident, top Apple exec Eddy Cue on Wednesday was raising expectations about the company’s upcoming products.
“Later this year, we've got the best product pipeline that I've seen in my 25 years at Apple," Cue said at the Code Conference.
If Apple can meet those ever-higher expectations, expect the stock to fly even higher, too.