Apple shares have smoked the broader market in 2019, but will it do the same in 2020?
Maybe the stock won’t appreciate 71% in 2020, the way it did in 2019, but it can still potentially have a better year than the average U.S. stock in 2020.
The gains this year have been driven by optimism about many of Apple's businesses. Investors have recently begun to appreciate Apple's burgeoning services and wearables businesses, while iPhone 11's are selling well and 5G demand and production both look strong. One of the biggest 'X' factors for the hardware side of the business has been the trade war, and since early October, the U.S. market has risen considerably, partly on optimism about a trade deal being reached.
Here's what Wedbush Securities analyst Dan Ives thinks will drive the stock in 2020:
"It's all about a super cycle -- you have iPhone 11 and 5G. Right now, you have about one third of the installed base that's going to upgrade over the next 12 to 15 months. And China [sales] continues to be 10 to 15% above expectations. That, combined with the services, is a re-rating that's happening."
Still, some may wonder about what the trade war between U.S. China do to the stock, especially if December 15 or 2020 tariffs are implemented.
Ives notes that the tariff impact could hit EPS in 2020 by 4%, but the impact would be "containable." Apple could either absorb the cost and accept lower gross margins or pass the cost onto the consumer via price hikes and accept lower demand. Ives said, "I don't view the story as majorly changing in terms of this tariff. Ultimately, we continue to believe that either does not happen, in terms of December 15, or they do get a carve out [exemption]."
All in all, analysts are looking for 12% to 15% EPS growth in 2020 and 2021, aided buy stock buybacks. Should Apple mantain or beat those expectations, the stock could move up by at least a similar percent. Ives' price target id $325, suggesting 20% upside.
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