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Apple ( AAPL ) stock rose Friday on news that the iPhone maker is investing $1 billion in Chinese ride-hailing service Didi Chuxing , a rival to U.S.-based Uber Technologies. Apple shares were up 1%, above 91, in midday trading on the stock market today . On Thursday, Apple stock fell to its lowest level in nearly two years, below 90. Apple CEO Tim Cook told Reuters that the investment is strategic and will help it better understand the Chinese market. Backed by Chinese Internet giants Alibaba ( BABA ) and Tencent ( TCEHY ), Didi Chuxing is the dominant ride-hailing service in China, operating in more than 400 cities. But Didi Chuxing has been losing billions in a costly battle with Uber for market share in China, Reuters said. The Didi Chuxing investment comes as Apple reportedly is spending heavily on R&D related to automotive technologies. Observers widely believe Apple is working on an electric, self-driving car. Apple Shoring Up China Relations Apple also is trying to shore up its presence in China, where it has faced increased regulatory scrutiny. Last month, Chinese authorities shut down Apple’s online book and video stores, following the introduction of strict regulations on online publishing, especially for foreign companies. “The (Didi Chuxing) investment makes sense as it should help improve Apple’s relationship with the Chinese government amid regulatory concerns (iBooks and iTunes Movies recently blocked in China),” Angelo Zino, equity analyst at S&P Global Market Intelligence, said in a research report. “Also, we view the connected car space as a major growth opportunity for Apple and this investment could help the company with those initiatives.” The inclusion of Apple Pay within Didi vehicles is a likely outcome of the investment, Zino said. Plus, the investment is a smart use of Apple’s overseas cash stockpile, he said. Drexel Hamilton analyst Brian White on Friday reiterated his buy rating on Apple stock, with a price target of 185. “China is one of the most important markets in the world for Apple and we believe this announcement represents an attractive investment, enhances the Apple ecosystem, opens up new opportunities for Apple Pay, offers the opportunities to learn more about the Chinese consumer, hows support for the country and provides Apple with a potential customer in the future for an ‘Apple Car,’ ” White said in a report. Apple’s estimated 5% ownership stake in Didi Chuxing, which is valued at $20 billion, isn’t going to break the bank for Apple. The company reported $21.5 billion in cash and equivalents as of March 26, and another $33.8 billion in short-term securities. “While this is an investment at the riskier end of Apple’s normal appetite, it has scope for upside and Apple might just learn some interesting things and make some important friends,” Richard Windsor, an analyst at Edison Investment Research, said in a statement. “For Apple, this represents an investment of 0.6% of its net cash balance and two days of cash flow from operations. Consequently, if it all goes wrong, it will be virtually unnoticed, but given the current valuation of Uber, Apple could double or triple its money quite easily.” RELATED: Apple Falls Anew Amid iPhone 7 Worries, Chip Stocks Follow Scalper1 News
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