Apple slips below $2 trillion market cap

Yahoo Finance Live anchors discuss Apple’s market cap sinking below $2 trillion.

Video Transcript

JULIE HYMAN: Let's get to the top three things you need to know as the clock hits 9:00 AM. Futures are inching higher this morning after a sloppy start to the year, with Wall Street darlings Apple and Tesla adding to souring sentiment. We'll talk about what that means for the broader market and whether they're coming back today.

BRIAN SOZZI: Plus, showdown in Washington. Kevin McCarthy failed to gain the votes needed to become Speaker of the House with voting set to resume at noon today. We've got the latest on the DC drama.

BRAD SMITH: And the bumpy ride, Tesla shares closed at their lowest levels in two years yesterday after the automaker missed on deliveries for the third straight quarter. We're going to speak to one bearish tech investor about what might come next for the battered EV manufacturer.

BRIAN SOZZI: But we begin today with our top story. Apple's market cap sank below $2 trillion for the first time since June 2021, marking a notable fall from grace for the tech giant as inflation and weaker economic conditions stoked demand fears. Apple is the last major company to surrender its $2 trillion valuation after Microsoft and Saudi Aramco both slipped from the mark last year.

And the stats are just, I would say, stunning. Outside of just the optics of this $2 trillion mark, we have Apple shares now down 15% in the past month alone. The company's not come out with any release. They have not won in earnings. They have not pulled a Salesforce and cut workers, like we saw from Salesforce this morning. Yet, there's a lot of concerns out there, mostly driven by fears about the China reopening on how Apple fared in that December quarter.

JULIE HYMAN: Yeah, and what's interesting about Apple is it held up relatively well for most of last year. And indeed, if you look at the 2022 performance for Apple, it fell, but it didn't fall as much as some of its large cap tech peers, right? What really changed is in the last month, when it really started to accelerate to the downside, and then outpaced on the downside the NASDAQ's fall, for example, the NASDAQ 100, which was down about 9% over the month of December. Apple was down 12% in the month of December.

And it does have to do with some of these demand concerns and concerns about what's going on in China. The question is whether the demand will just be delayed or eliminated, which is frequently the question with Apple, right? So is it just that some of its iPhone sales will be pushed out further or that people just won't get the phones at all?

BRAD SMITH: Yeah, and on the front of that demand, it really just comes back to where Apple finds itself in this cycle and for the next supercycle that can emerge, especially within that iPhone category, which is more than half of its overall revenue and net sales at the end of the day across product categories. You saw weakness in iPad. Perhaps that's an area where they're going to continue to have to account for some of that weakness, year over year declines there.

But one other part of the business that continues to hold up well and where investors might be trying to get ahead of any kind of pullback in some of those consumer discretionary dollars in platform is the services business. And that services business continues to exhibit growth. It didn't quite hit $80 billion run rate last year, but you're looking at a services business on a quarterly revenue basis that is bringing in more than the equivalent of market caps of companies like Spotify and Snap and Take-Two Interactive, all of those areas where Apple, of course, does want to play in one facet or another.

BRIAN SOZZI: I mean, are we at that point? Are we nearing that point where we can say Apple shares might be oversold. Dan Ives, this guy's been on fire this morning, publishing notes on Salesforce, Apple, and Tesla. But I like what he said on Apple. He said it looks, based on his channel checks, that demand for the iPhone looks to be stable. Now he is seeing some cuts in the supply chain for Macs, other devices that Apple produces. But if that iPhone demand is stable, that is usually the driver of Apple stock. So is it just oversold here?

JULIE HYMAN: It could be. I mean, the valuation is-- it's still trading above its long-term average. I think it's trading at about 20 times forward earnings. But one more thing you can look at is the expectations. The company is set to report its earnings towards the end of the month. And here are the first quarter revenue estimates--

BRIAN SOZZI: Wow.

JULIE HYMAN: --from analysts. And you can see the decline here that we have seen in--

BRIAN SOZZI: It's huge.

JULIE HYMAN: --the numbers. Yes, definitely. So that's something to keep in mind. I think that should be millions, instead of thousands, but you get the general idea.

BRIAN SOZZI: Yeah, positive if you're trading Apple into earnings. Of course, this is now what they would say a lower bar to beat. You know, Apple would come out here with a penny beat, and maybe the stock would go up.

BRAD SMITH: Yeah, absolutely. We're going to keep a close eye on shares of megacap tech, but especially AAPL.