Question

In: Economics

Why did Apple stock increase on 6/13/19 and 6/20/19

Why did Apple stock increase on 6/13/19 and 6/20/19

Solutions

Expert Solution

The changes in stock prices depend on various things. It can be earning per year, profit, any news which is good for the company or any news of mergers, or buying a company. It also depends on the innovation a company is doing, its share price, book price or buyback of the shares, etc. These are the basic reasons why the stock prices of a company may rise or fall. In case of Apple stocks, the company was showing less innovation, and the demand for i-pods were also decreasing and it was expected that the company will make less revenue this year but this was proved wrong recently. Apple has made large revenue by the service business and other businesses and announced in March 2019 that they will initiate to pay dividends.

The market cap is fixed and therefore any changes in buying and selling do not affect the market cap. Moreover, when Apple announced the payment of dividends, it meant that they will buy back its shares from the market. Therefore the reason why Apple stock prices increase in June was the buyback of their own shares. It is said that Apple has gained 74 percent profit last year by which it has bought its own share. Buying back of the shares by its own company which was listed in the market before at a relatively higher price than the share market is called buyback of the share. This is one of the ways to invest in their own company. This will automatically increase the price of the share after the buyback by the company. Since the market cap is fixed, when the company buys back the share, at a higher price and then the shares available in the market decreases and therefore the stock prices automatically increase at least up to the price at which the company has buyback the shares.

Therefore, Apple stock increased between 6/13/19 and 6/20/19.


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