No one has spared the market routine in the past four weeks. Mega-cap tech giants, which have fueled the stock market boom over the past decade, also took to the air as investors indiscriminately sold stocks after the coronavirus pandemic spread to the United States
While there is still tremendous adjustment in the economy and in the financial markets, the current price action in the market suggests that investors are quickly buying up the shares of some of the best managed companies, taking advantage of the dramatic price drop to buy in in a number of previously very expensive shares.
Below we take a look at Apple (NASDAQ 🙂 and Microsoft (NASDAQ 🙂 – two companies with market capitals of more than a trillion dollars – to understand which stocks are better positioned to perform better once the dust has dissolved and the COVID – 19 pandemic has been contained.
Apple & # 39; s Cash Cushion
Shares of iPhone maker, Apple, one of the 30 stocks on the market, were among the hardest hit. They were down 35% on March 23 from their peak of $ 327.85 on January 29.
But as markets began to recover from their worst recession since the 2008 financial crisis, Apple also saw a smart rebound, gaining about 20% from its low this month. The stock closed at $ 254.81 yesterday, after a 2.8% profit.
The coronavirus, which has already killed 3,170 people and infected more than 160,000 people in the US, has brutally repressed American technology companies with a strong presence, particularly in Asia. Apple, which relies on China for about 20% of its revenues and relies heavily on the Asian nation to manufacture its phones, is particularly vulnerable.
The outbreak of and response to COVID-19 has posed several challenges to Apple, including disruption to China's manufacturing supply chain. For example, Apple's stores outside of China are closed until further notice, and many regions in the United States have those at home until the end of April.
Analysts also fear that the disruption caused by the coronavirus could delay the launch of Apple's new iPhones, delaying the rollout of 5G powered handsets, which offer tremendous growth potential.
But these are temporary challenges that can impact and bring profit in the coming quarters. However, what draws investors to Apple shares is the company's huge innovation ecosystem and huge wealth of money.
High-tech tech stocks are among the "best positioned to weather the storm," Evercore ISI analyst Amit Daryanani said in a note on Sunday. The iPhone maker "has the largest net cash position within our coverage," Daryanani noted. Apple currently has about $ 207 billion in cash on hand, with about $ 108 billion in both short and long-term debt.
Microsoft & # 39; s Cloud Advantage
Despite the economic uncertainty created by the coronavirus outbreak, Microsoft is one of those tech stocks that is benefiting from the increased demand for connectivity in this home working environment.
The biggest reason for a bullish view of Microsoft's long-term shares is that companies and governments will continue to devote themselves to their transition to cloud computing – the most important area of ??the company in recent years.
Microsoft Weekly Price Chart
"We have seen a 775% increase in our cloud services in regions that have enforced social distance or enforcement," Microsoft said in a blog post on Sunday.
The Microsoft Teams app, which allows people to make video calls and exchange instant messages, had added 12 million additional daily users in a week, for a total of 44 million, the company said. And yesterday, Microsoft introduced a version of its Microsoft 365 bundle that will make Teams available to consumers.
People are also continuing to use the older Skype app, which has 40 million daily users, 70% more than a month ago, Microsoft said.
After all the stock market turmoil over the past month, Microsoft's stocks are back in positive territory this year, up more than 1%. The stock closed at $ 160.23 yesterday after a 7% jump in a wider market recovery. It was one of the best-performing stocks in the tech sector last year, delivering a 60% return to investors.
Bottom Line
Apple and Microsoft are both among the most resilient tech giants best able to survive the economic downturn due to the strength of their product offering and robust balance. its supply chain than Microsoft, making it a riskier bet in the short term.
