Is Apple still worth a bite? Hungry for success
Technology stock Apple has become the world’s first trillion-dollar public company but at US$207 ($310) a share does it still have more room to grow? Mark Devcich, head of Research & Portfolio Manager at Pie Funds, believes the answer is yes.
Devcich, a self-confessed buyer of the latest iPhone X, says the company is still trading at a reasonable valuation of around 18 times price to earnings which makes it a lot cheaper than other tech names such as Amazon, Facebook or Netflix.
He says that is because some people view Apple as a hardware company. “And we have seen what has happened with the likes of Blackberry and Nokia.”
But others see it more as an ecosystem which is hard to get out of. Once you get hooked on the apps, iCloud service and iPhones it is hard not to keep updating them.
“People get hooked into the system and are forced to pay on price. I think it probably does have room to go higher.”
But Devcich is picking that growth will be driven by a new avenue like payments or something we have never even heard of yet and hasn’t been factored into its earnings.
“It’s earnings are still trading at an attractive level.” Backers of Kiwi meal kit business My Food Bag will surely have one eye on the listing of Australian food kit business Marley Spoon on the ASX last month.
My Food Bag co-founder Cecilia Robinson confirmed earlier this year it was still on track for a sharemarket float by the end of 2019 and interest from local investors is said to be strong.
But other food kit listings have not gone so well.
German company Marley Spoon raised A$70 million ($77m) through an initial public offer priced at A$1.42 and was listed on the ASX on July 2.
Its share price fell to A$1.195 on the first day of trading and, while it has recovered somewhat since then, the company is yet to regain its offer price with shares trading around A$1.35 last week before falling back to $1.10 yesterday.
Meanwhile US meal kit business Blue Apron which went public in June 2017 had a disastrous start with its share price nearly halving just a few months after listing and its chief executive stepping down.
The shares initially traded at US$9.34 but closed at US$2.28 on August 8, on the New York Stock Exchange.
Local experts have been quick to point out the differences with My Food Bag, the biggest and most dominant player in the New Zealand food kit delivery market, while Marley Spoon is a smaller player in Australia.
Another also reminded that what plays out in Australia doesn’t always happen here.
Listed retirement village operators have been hugely successful on the NZX but not so much on the ASX.
Solid start
The reporting season kicked off this week with a solid start from SkyCity but analysts are closely watching what impact rising cost pressures are having on the sector.
Milford Asset Management’s Sam Trethewey says it is hearing chatter of cost pressures coming through with the likes of Ryman Healthcare flagging a $5m wage bill increase.
“This looks like a major issue that could impact the performance of New Zealand companies going forward,” he said.
Trethewey said it would be looking closely at which companies had enough pricing power to pass on cost increases and maintain margins. It was also considering the impact of the plateauing local housing market.
“What does that mean for the ‘wealth effect’ that housing had created and how will people spend their money differently?” asked Trethewey. “For instance, do travel companies like Air New Zealand get impacted by people feeling less wealthy and taking fewer holidays?”