The COVID hangover is real. Apple Inc. (AAPL) recently decided to delay staff's return to the office until at least January 2022, pushing back its original target of October. But with surging cases, Delta and Lambda variants running rampant, and the CDC's reversal of mask guidelines, Apple wants to play it safe.
For now, Apple stores remain open. At the height of COVID, once our local mall opened, I masked up and went for a survey. The single largest retail space was shuttered and had no indications of when it would reopen. That was the Apple store. We're nowhere near that now, and hopefully not going back there.
It did make me wonder though, how is COVID affecting the tech super giant? Should investors worry at Apple's delayed return to work?
- Apple (AAPL) announced that it will keep remote workers at home until early 2022.
- Apple's "Services" revenue—which includes Cloud services, Apple Music, advertising, video, payments, and insurance—grew substantially in 2020.
- The stock still sports a lot of Big Money support.
First let's look at what impact COVID really has on Apple. Many are aware that lockdowns and restrictions hurt much of the economy. Restaurants, leisure, and travel bore the brunt of it though. Tech giants like Apple actually benefitted from it. Restrictions and lockdowns meant fewer distractions caused by "real life," allowing consumers to focus on Apple products.
One might conclude that Apple's main boost came in its content divisions. And they'd be partially right. Relying on Apple reported revenue, "Services" revenue grew substantially in 2020. In fact, the three last quarters of the year, the segment made up more than 20% of total revenue. Services includes Cloud services, Apple Music, advertising, video, payments, and insurance.
I'll use myself as an example, as I helped in my own small way. My wife asked that we subscribe to Apple TV. The low sum of $4.99 seemed like a no-brainer. However, when I add it to my existing Apple Music and iTunes Match services, I now know that I'm spending $265 per year on access to content.
Apparently, I'm not the only one because the trend is strongly continuing. Even my business partner is raving about Ted Lasso. He accounts for one more of the many Apple paid subscriptions that now number more that 700 million—up 150 million from last year.
For the second quarter earnings of 2021, Services brought in $17.5 billion, up 33% from $13.2 billion in the year-ago quarter and up from $16.9 billion last quarter. That's a record. But it's not just Services that's kicking butt. Looking at the following chart, we see a quarterly breakdown of Apple's revenue:
We see that, nine years ago, iPad was a significant driver of sales. But that shrank as time went on. Clearly, the overflow went right to the iPhone—the blue bar. This makes sense to me, again using my own example, as two of my three kids "graduated" from iPads to iPhones. We have four iPhone 12s in the house at a thousand bucks each. I pay a fraction of that monthly through my phone provider, but that's still a lot of money.
Getting back to COVID-19, it altered Apple's revenue distribution—but not for the worse. In 2020, with store closures, supply chain disruptions, and crunched consumer wallets, Apple posted a record fiscal year, and its stock doubled.
Investors may naturally just think iPhone, iPhone, iPhone. But in September's quarter last year, Apple sold $9.03 billion in Macs, another record. iPad sales also surged, growing sales 31% in each of the prior three quarters. Just last month, Apple reported $7.4 billion in iPad sales for the quarter: an increase of $1 billion from the same time last year.
I estimate that my household of five people pays about 140 bucks per month on Apple equipment and services. Yeah, I'm a fan. That doesn't even include the network cost and line charges for communications. I'm definitely doing my part!
The fundamental story of Apple clearly shows that COVID is helping. But to gauge how Apple stock is faring in the eyes of big professional investors, I like to look at Big Money buying. MAPsignals measures unusual Big Money buying and selling on thousands of stocks. I looked to see how Apple faired through the pandemic until now.
Here we see all the Big Money Buying since last year. This table summarizes how many Big Money Buy signals Apple has had since 2014. It also highlights how many times it was on the Top 20 (top 20 scoring stocks):
Clearly, large investors are not shying away from Apple shares. The buy signals are important, but when a stock appears repeatedly, it has the makings of an outlier stock: one that towers above the rest in terms of performance.
Let's look at a chart. Apple has been hitting the right strides for years. Long-time big institutional support is a great recipe for long-term success.
Above, I've plotted a few of those Big Money buy signals. I've also included accumulation at the bottom. That's a sign that the shares have been getting scooped up.
The Bottom Line
Look, the latest headlines may rattle nerves. It stokes COVID fears that life will never again be normal. I'm an optimist, so I don't subscribe to that. But even if it's true, Apple appears to be doing fine.
COVID is definitely affecting Apple—measurably for the better. And it will likely continue for a while to come.
Disclosure: The author holds no position in AAPL at the time of publication.