Investors have scrambled to look up several stocks today that made big headlines. GuruFocus’ Most Active Stocks gives a direct line into the trends of the stock investing community, showing what others in the same boat are doing.
Unsurprisingly, Apple (AAPL, Financial) is the most active stock as of early Monday afternoon. The iPhone maker’s shares fell 7% over the past two days, in their steepest dip all year. Monday’s price has declined 3.62% to $143 per share.
The shares took a dive as analyst Abhey Lamda of Mizuho downgraded the stock to neutral from buy, anticipating a $150 to $160 price target.
“The stock has meaningfully outperformed on a YTD basis and we believe enthusiasm around the upcoming product cycle is fully captured at current levels, with limited upside to estimates from here on out,” Lambda said in a Monday note.
Lamda continues to expect a strong iPhone 8 cycle, but sees little room for upside – and possible downside risk – on shipments, iPhone average selling price and EPS. He also cited limited growth in non-U.S. markets as a concern.
“At 15x and 11x NTM EPS and FCF, the stock is trading near the upper-end of its recent valuation range and we believe it is tough to expect the multiple to expand,” the note read. “With limited upside to EPS or FCF estimates, we think the stock is fully valued.”
But other conditions may have triggered the downturn instead of outright pessimism. Lyn Alden, founder of Lyn Alden Investment Strategy, said the dip may have been more connected to a selloff in tech stocks and “largely separate” from the downgrade.
She noted that Apple trades at a price to free cash flow ratio of about 16 and has a strong balance sheet. It has also been buying back shares at a rate of 5% and paying a dividend of 1.75%.
“Even if they were to have no volume growth going forward, the company would provide nearly a 7% inflation-adjusted rate of return for the foreseeable future purely from these shareholder returns,” Alden said.
“Any growth that occurs would be on top of that. It would take long-term persistent sales declines to truly make Apple a bad investment today.”
The latest-version iPhone 8 is expected to launch in September, with a new operating system, iOS 11 and rumors of a glass body, edge-to-edge display, wireless charging and no home button. For its fiscal 2017 third quarter ending on July 25, Apple is expecting revenue between $43.5 billion and $45.5 billion and gross margins of 37.5%-38.5%.
The fourth stock on the most investors’ minds was General Electric (GE, Financial), where a change of leadership caused a stir. GE Chairman and CEO Jack Immelt stepped down Monday, to be replaced by John Flannery, the current CEO of GE Healthcare, following a plan that started to take shape back in 2011.
GE shares popped 3.99% Monday as the market reacted with hope for a better performance than it has seen in years past. The company’s stock has languished over recent years, missing the rally this year with an 8.19% decline versus the 8.75% rise in the S&P 500 so far.
Immelt joined the company in 2001, presiding over a 29.8% loss for shareholders through his tenure versus a more than double return for the S&P 500. In the past 10 years, the company also saw a 3.3% average annual drop in revenue, 12.3% rate of EBITDA decline and 0.5% decline in book value.
At the same time, the CEO walked the company through many challenges, which Goldman Sachs CEO Lloyd Blankfein praised him for Monday in a Tweet.
Congrats to @JeffImmelt for leading GE thru 9/11, fin'l crisis & slow global economy. Revamped portfolio, 2X core profits. #1 biz statesman.
— Lloyd Blankfein (@lloydblankfein) June 12, 2017
In a release, the company’s touted the new CEO’s history of results. At GE Capital in the Asia Pacific region, grew earnings in Japan by 100%, in Korea by 30% and Australia by 25%. Then in 2011 he grew industrial sales in India by 50%, and followed it with leading several major business deals for the company.
At GE Healthcare in 2014, Flannery helped turn the business around, growing organic revenue by 5% in 2016 and overseeing the expansion of its technology offerings. He has been with the company since 1987.
“John is the right person to lead GE today. He has broad experience across multiple businesses, cycles and geographies,” Immelt said. “He has a track record of success and led one of our most essential businesses. Most important are his strong leadership traits - good judgment, resilience, a learner, team builder and a tough-minded individual and competitor. He will be trusted by investors, our customers and the GE team.”
In recent years, the company has transformed into a focused industrial behemoth, with businesses in power, aviation, health care, aviation and energy.
Under Flannery, it will focus on growth, cash and costs. But it won’t be changing its operating framework of $1.60-$1.70 in operating EPS, free cash flow plus dispositions of $16 billion to $20 billion and $19 billion to $21 billion in returns to investors for 2017.
