Why Apple stock jumped to a new all-time high on Monday

Investors may soon have 15 billion more reasons to buy the tech giant's shares.

| More on:
share price rise

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Apple's (NASDAQ: AAPL) stock price climbed 3% to a record closing high of $153.12 on Monday, following an intriguing analyst report.

So what

Alphabet's (NASDAQ: GOOGL) (NASDAQ: GOOG) Google could pay Apple roughly $15 billion this year to retain its place as the default search option on iOS, according to Bernstein analyst Toni Sacconaghi. That's up from an estimated $10 billion in 2020.

Apple's shares popped on reports of a lucrative new deal with Google.

Sacconaghi posits that the deal with Google will boost Apple's services revenue growth by 8.5 percentage points -- and account for as much as 9% of the iPhone maker's gross profits in fiscal 2021.  

Now what 

It's not hard to see why Google would be willing to pay such large sums. Despite its efforts to diversify its business, advertising revenue still represents the lion's share of its profits. And while Google remains the dominant search engine in the U.S. and many other areas of the world, the last thing it wants to do is let rival Microsoft outbid it and claw back market share. As for Apple, there's little to lose and much to gain. Google is clearly the most popular search engine, and the great majority of its users would probably choose Google for their search needs. Apple also lets its users choose among different search providers, such as Microsoft's Bing, if they prefer a different option. So for simply doing something most of its customers would do anyway, Apple reportedly earns billions of dollars of high-margin revenue. The risk, however, is that regulators will move to block these payments to curb Google's ability to stifle competition. Yet for today, at least, investors appear to be taking a more optimistic view -- and are bidding Apple's shares up in kind.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Joe Tenebruso has no position in any of the stocks mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Apple, and Microsoft. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on International Stock News

A woman is excited as she reads the latest rumour on her phone.
Broker Notes

Goldman Sachs says this US stock is replacing Tesla in the Magnificent Seven

And no, it's not a tech company. It's in the healthcare sector.

Read more »

A man looking at his laptop and thinking.
Share Gainers

Should I buy Nvidia stock as an Australian investor?

Many Aussies are thinking of jumping on the bandwagon, but they need to think about these issues first.

Read more »

Digital rocket on a laptop.
Broker Notes

Is the Nvidia share price on course to reach US$1,400?

You betcha, says one analyst.

Read more »

A woman holds a soldering tool as she sits in front of a computer screen while working on the manufacturing of technology equipment in a laboratory environment.
International Stock News

Could Nvidia become the most valuable stock on earth?

Can anything stop the Nvidia stock price?

Read more »

A group of young ASX investors sitting around a laptop with an older lady standing behind them explaining how investing works.
International Stock News

What can ASX investors learn from Warren Buffett's latest buys and sells?

We've just found out what Buffett's been buying and selling recently.

Read more »

electric vehicle such as Tesla being charged at charging station
International Stock News

Why Tesla stock tanked in January

Will the electric vehicle leader see earnings decline once again in 2024?

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
International Stock News

Will Nvidia stock be worth more than Microsoft by 2030?

The graphics giant has been growing at a much faster pace than Microsoft, but can it sustain that momentum?

Read more »

Man with hands in the middle of two items with money bags on them.
International Stock News

Stock-split watch: Is Tesla next?

Stock splits are fun. But how much substance there is in Tesla splitting its stock is debatable.

Read more »