Tech Stocks This Week: Apple's Pullback, Google's Hardware Bet, and More
Though it was a flat week for the S&P 500, tech stocks saw a bit more volatility as the heavily technology-weighted Nasdaq composite index pulled back about 0.4%. Apple (NASDAQ: AAPL) was among the big movers in tech, with its stock falling about 5%. Telecommunications company Sprint (NYSE: S) also saw its stock move big -- but in the other direction -- when reports surfaced that it may merge with T-Mobile (NASDAQ: TMUS).
Looking beyond stock-price movements during the week, Alphabet's (NASDAQ: GOOGL) (NASDAQ: GOOG) Google notably announced a surprise acquisition of part of phone-maker HTC's business. Here's what investors should know about these stories.
Apple stock's pullback
Apple stock had a rough week leading up to its iPhone 8 and 8 Plus launch. And the stock's pullback continued into Friday -- the day of the iPhone 8 and 8 Plus launch. Shares closed Friday down about 1%. The stock's decline during the week extended a pullback since Apple announced its new iPhones on Sept. 12. Shares are down 6% since Apple's iPhone event.
The pullback in Apple's stock price could be a buying opportunity, as concerns about Apple's business seem shortsighted, and mostly focused on the iPhone X's delayed launch compared to the iPhone 8. But Apple still looks well positioned to grow sales significantly during its full year of fiscal 2018, which begins during the holiday quarter.
Further, Apple stock is arguably undervalued at this level. Its price-to-earnings ratio of 17.3 is easily justified by the company's loyal customer base, pricing power, and recent return to revenue and earnings growth. Further, the launch of Apple's totally redesigned iPhone X in November will likely accelerate Apple's revenue growth.
Google's big bet on hardware
Alphabet announced a surprise acquisition of part of HTC's business this week, buying about 2,000 of HTC's employees and obtaining a non-exclusive license for HTC intellectual property in a $1.1 billion cash deal.
The move better positions Alphabet to invest further in its consumer-hardware business. Many of the HTC employees Alphabet's Google gained were already working on Alphabet's Pixel smartphone. Google said the HTC team will "fuel further innovation and future product development in consumer hardware."
The purchase of part of HTC's business comes weeks before Google unveils its next-generation Pixel smartphone.
T-Mobile and Sprint's potential merger
T-Mobile and Sprint -- two of the big four telecommunications companies in the U.S. -- finished out the week with news of a possible merger. The two companies are close to agreeing on tentative terms for a deal to merge, Reuters reported on Friday, citing "people familiar with the matter."
T-Mobile CEO John Legere would lead the combined company, Reuters' sources said. Given that T-Mobile stock has significantly outperformed Sprint in recent years, having Legere at the helm would make sense. Over the past five years, T-Mobile stock is up 266%. Sprint stock is up only 32% during the same period.
Both stocks climbed higher on the news. But Sprint's stock rose more significantly. T-Mobile stock traded about 1.1% higher on Friday. Sprint closed the trading day up 6%.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.