Fakoyejo OlalekanApple is on the verge of losing its $2 trillion market capitalisation, as shareholders dump the technology firm’s stock amid fear of projected U.S economy entering recession in the second half of this year.
Investors are offloading tech stocks, to reduce exposure to risk on their investment portfolio due to surge in inflation rate, which rose to a 40-year high of 8.6%, and has increased the cost of living and cut consumers purchasing power.
There are projections that the U.S government will further increase rate on loan interest, which will weigh on cost of goods in the country. During inflationary period, tech companies often suffer from consumers readjusting their priorities.
With the declining purchasing power expected to affect earnings from sales, growth in Apple’s share is blurry, and in response, investors are selling off their shares to profit from the bullish run over the years.
The bull period had pushed Apple’s market capitalisation up to $3 trillion in January 2022, but the sell off has wiped off about $800 billion from the firm’s valuation, and now around $2.15 trillion, but the country is likely to lose its grip on the $2 trillion level.
Analyst have projected that the share of Apply will not be the only thing taking a hit in the company, as earnings will also fall in the longterm. This comes as COVID-19 disrupt Apple’s supply flow of its products in China, one of the firm’s biggest market.
The company has also stated in April, that in Q2 2022, turnover will also decline by $4 billion to $8 billion, a disclosure that will only further negatively impact the capital market’s confidence in the firm, and encourage more sell off among its shareholders.
Summarising the situation in Apple, the Chief Executive Officer at investment research firm, New Constructs, David Trainer, said, “In the same way that Apple benefited from the Fed-fueled bull market, it will suffer as the low interest rate and quantitative easing subsidies fade.”
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