Investors who would like to exchange the theoretically unlimited profit potential of a direct investment in Apple stock for the chance of a high sideways return could turn their attention to Apple Discount Certificates.
The sell-off in technology stocks over the past few weeks has also left its mark on Apple stock. At the beginning of 2022, the shares on the US technology exchange NASDAQ were still above 180 US dollars (USD), close to the all-time high. It is now trading 20 percent lower at USD 144 because of the known problems, such as the supply bottlenecks, the corona lockdowns in China and also because of the upcoming interest rate hikes.
Despite these negative circumstances, Apple stock is recommended as a buy by the majority of experts with price targets up to USD 185.
The investment idea
Investors who want to take advantage of a reasonably stable Apple share price trend in order to achieve a return above the inflation rate over the next 13 months could consider investing in discount certificates instead of buying the shares directly. If you want to exchange the unlimited profit potential of direct equity investments and the prospect of dividend payments for the chance of a sideways return, you can choose from a large number of suitable discount certificates.
The way it works
If the Apple share is quoted at or above the cap on the valuation date of the certificate, then the discount certificate will be sold at its maximum amount of USD 125, which at the current EUR/USD exchange rate of USD 1.073 will correspond to a euro equivalent of EUR 116.50. repaid.
The key data
The Morgan Stanley discount certificate (ISIN: DE000MD0GLL1) on Apple shares has a cap of USD 125. Valuation date is June 16, 2023, the certificate will be redeemed on June 23, 2023. With the Apple share price of USD 143.84 and the stated EUR/USD rate, investors were able to purchase the certificate for EUR 104.06. With a discount of 22.37 percent, the certificate is therefore cheaper than the share.
The chance
Since the certificate is currently priced at EUR 104.06 (USD 111.66), it allows for a gross return of 11.95 percent over the next 13 months at a more or less constant EUR/USD exchange rate if the share price on the valuation date does not is down 13.10 percent compared to its current value. A weakening euro will have a positive effect on the investment result.
The Risks
If the Apple share is quoted below the cap of USD 125 on the valuation day, the certificate is redeemed at the closing price of the share determined on the valuation day. If the share then trades below the purchase price of the certificate, the investment will end up in the red. An increase in the exchange rate of the euro against the USD will have a negative impact on the investment result.
This article does not constitute a recommendation to buy or sell Apple shares or investment products based on Apple shares. No liability is assumed for the correctness of the data.
