Apple is arguably one of the most profitable tech companies with a large stockpile of money from revenue. The money is usually reinvested in different entities to enhance its financial position and the returns have remained varied over the recent years.
Data presented by Buy Shares reveals that revenue generated from Apple’s marketable securities investments has plunged by 52.97% over the last six years. In 2015, the revenue stood at $107.4 billion, while this year, the proceeds are at $50.5 billion. The data shows that the revenue has been gradually dropping over the years. However, revenue generated from maturities of marketable securities has grown by 382% over the six years.
The research also overviewed the global assets of Apple from 2004 to 2020. The assets were at an all-time high in 2017 at $375.32 billion. By 2020, the assets have dropped by 13.7% to $323.89 billion.
Apple investments in marketable securities fluctuate
For Apple, marketable securities refer to assets that can be liquidated to cash quickly.
The tech giant usually keeps most of its assets overseas to avoid paying US taxes on the money. In this case, Apple usually prefers to borrow money to engage in its share buyback program. Over the recent years, Apple has been channeling most of its cash into boosting its businesses rather than putting it into investment products like securities.
In spending its cash, Apple is known to invest a big percentage in marketable equities. However, over the last six years, the investment has fluctuated, something that is impacting returns. Over the same period, Apple has spent a significant amount on acquiring property, plant, and equipment. The company has recently increased its activities around global acquisitions and mergers.
With investment in securities being held overseas, Apple is on record stating such investments come with various risks like extended liabilities, political, legal, and regulatory challenges. Such factors can hurt the company and its financial position.
In recent years, the marketable securities have been specifically impacted by credit deterioration, sovereign risk, interest rate fluctuations, among other factors. The factors have resulted in the recent fluctuation of the portfolio. At this point, the drop in returns from marketable securities has not impacted the company’s overall revenue, but if the drop continues, the profits will be at risk.
Apple stock plunges by 11% as iPhones sales dwindle
It is worth mentioning that Apple’s marketable securities investment portfolio targets highly rated securities to minimize potential risk. However, the strategy appears not to be paying, as highlighted by the fluctuations. Apple has a long-standing policy that requires securities to be investment grade and while limiting credit exposure. To turn the fortunes, Apple might decide to sell specific marketable securities to repurchase them later at a specified time and amount.
The drop in marketable securities revenues can also be linked to its strategy to deal with iPhone sales dwindling. In recent years, Apple began channeling more money in cutting prices in some countries and starting a trade-in program for older iPhone models. This is after it emerged that some people are keeping their iPhones longer. Currently, iPhone sales no longer account for a big chunk of the company’s revenue.
The drop is also visible in the general Apple stock, which has declined by 11% on a year-over-year basis. The struggling stocks are linked to the company’s decline in iPhone smartphone shipments for the September quarter. The drop was due to the iPhone 12 series’s delayed release, whose data was not captured in the third quarter.