Microsoft retook the crown from Apple as America’s most valuable company after the iPhone maker announced it would miss its fiscal second quarter guidance as it wrestles with the impact of the coronavirus outbreak in China.
Apple Inc. (NASDAQ: AAPL) broke the news Monday, which was Presidents’ Day in the U.S. so markets were closed.
“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” the company said in a statement.
Apple stock took a 3% hit in premarket trading Tuesday after the markets had been closed Monday. The stock had recovered some of those losses Tuesday, but still closed down 1.8%.
Apple and Microsoft (NASDAQ: MSFT) have been trading the title of “most valuable company” in the U.S. as the two tech titans both float around a $1.4 trillion market cap. Apple had a 67-session streak going through the end of 2019 and start of 2020 before Microsoft took the crown again on Feb. 10 and Feb. 11.
After Tuesday’s market close, Microsoft’s market cap sat at $1.42 trillion, while Apple closed at $1.4 trillion.
And the two companies will probably hold those top spots for the foreseeable future as their other big tech competition, Amazon and Google parent Alphabet, trail by a good chunk. While both tech giants have made it into the “$1 Trillion Club,” Amazon is valued at $1.06 trillion as of Tuesday’s open, while Alphabet sits at $1.04 trillion.
What Could Affect Apple’s Stock
Apple’s projected revenue miss for the coming quarter has spooked some analysts, but for the most part it didn’t change their bullish outlooks.
Wedbush analysts Daniel Ives and Strecker Backe said there may be a “knee-jerk reaction” by investors Tuesday (which we saw with the slight pullback), but overall the stock will be propped up by the innovation of 5G later this year.
“While trying to gauge the impact of the iPhone miss and potential bounce back in the June quarter will be front and center for the Street, we remain bullish on Apple for the longer term 5G supercycle thesis despite today’s news,” the analysts said in a note to clients, according to MarketWatch.
Raymond James analyst Chris Caso points to the March quarter as being historically weak for Apple, and he thinks “almost all of the production and most of the demand is likely to be recaptured once Apple’s manufacturing partners are able to return to full production, and once retail facilities in China return to normal.”
Apple stock has been outperforming the Dow Jones Industrial Average quite a bit lately, adding 18% to its value in the last three months. The Dow has only increased 4.5% in that same time frame.
What Could Affect Microsoft’s Stock
It’s been a great year for Microsoft so far with the company’s stock gaining another 15% since Jan. 1 after rising a whopping 55% in 2019. But can the tech giant keep that momentum going in 2020?
One thing that could keep the stock marching up is its cloud business. In its latest earnings report, Microsoft’s Azure cloud software revenue jumped 62%. It was helped by a $10 billion contract with the Pentagon to develop the Joint Enterprise Defense Infrastructure (JEDI) for the U.S. Department of Defense, but the contract has been contested by fellow cloud-computing competitor Amazon. On Friday, a federal judge placed a temporary halt on the contract negotiations.
Microsoft CEO Satya Nadella sees the importance of developing its cloud capabilities and said its “malleable power of software will drive productivity growth across all industries” during his earnings conference call earlier this month.
Microsoft has also teased plans for a new operating system, Microsoft 10X, which touts dual-screen support and super-fast updates for users. The timing is great as the tech giant plans to release two foldable devices before the 2020 holiday season with the Surface Neo and Surface Duo.
And what could be another boon for Microsoft is its reduced exposure to China and the coronavirus outbreak that is hurting tech businesses across the board. While it does have staff in China, it doesn’t rely on suppliers or retailers in the region like Apple does.
Because of these factors, the analyst rating consensus on TipRanks said Microsoft was a “strong buy” based on 26 industry analysts.
So analysts across the board remain bullish on both Apple and Microsoft, despite some pressure from the coronavirus, which means these two stocks are a good addition to any investor’s portfolio.
