Editor’s note: This column is part of our Best Stocks for 2020 contest. The Readers’ Choice pick for the contest is Apple (NASDAQ:AAPL).
So far, 2019 has been quite the year for Apple (NASDAQ:AAPL), and InvestorPlace readers are confident that the FAANG component will continue to soar high in 2020. Of its peer tech companies Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Apple is facing both similar challenges and similar upside catalysts.
The iPhone maker is up a whopping 72% year-to-date, making it this year’s best-performing member of the Dow Jones Industrial Average. Talks of increasing services revenue and up-and-coming technology are certainly boosting investor sentiment.
Analysts went into September thinking that its annual launch event (which brought us the iPhone 11 and AirPod Pros), was already priced into AAPL stock. But just since its release, the company’s year-to-date gains have doubled. When the company reports fiscal 2020 first-quarter results, investors will be watching holiday sales of the iPhone 11. Many say they’ll look good.
Don’t see how a stock that has had such a could run in 2019 can keep the gains going? Even though the iPhone 11 has excited many, 2020 will see a much more attention-drawing release. A 5G iPhone — playing on the global rollout slated for the new year — should hit shelves some time in 2020.
It’s no secret that 5G is a hot topic. Having one of the most well-respected tech companies in the game take part in the trend in such a tangible way is likely to excite both consumers and investors. At one level, 5G-enabled phones simply bring faster upload and download speeds. At a different level, it means you can watch higher-quality video streams on the subway or enjoy more reliable coverage at a sports game or major concert.
Although 5G coverage still needs some work, vendors are ready and waiting to sell 5G-enabled phones. You can currently pick one up from Samsung, LG and Motorola. But none of these names carry the same weight as Apple. When the 5G iPhone rolls out, expect high demand and happy investors.
Services Serve as Major Catalyst
Apple is also playing — or perhaps dominating — another important trend in tech. In November 2018 CEO Tim Cook announced that the company would stop reporting iPhone sales numbers during quarterly earnings reports. This shocked the financial community (I’m sure you can imagine all of the headlines). Granted, this decision came at a time when iPhone sales growth was flat year-over-year, sparking fears that sales would turn negative. But now, removed from the decision, it’s clearer that Apple is simply focusing more on services.
In the company’s fiscal fourth quarter, services revenue hit an all-time high, climbing to $12.5 billion. This division includes Apple Pay, Apple Music and the App Store. In that same quarter, Apple Pay became a serious challenger to PayPal (NASDAQ:PYPL), beating the latter company in payment services revenue and transactions. With the recently released Apple Card, it’s likely payment services revenue will just keep growing.
Plus, some like InvestorPlace’s Laura Hoy believe that an iPhone subscription service could be on the way. Once consumers are hooked to the sleek phones, a subscription promising updated hardware might be promising. Connecting back to the 5G, such a trend-setting new iPhone could make such a service even more popular.
With high iPhone demand and rising services revenue, AAPL stock has a lot of upside potential ahead.
Don’t Be Snow White
But zealous investors, be warned. There’s a a fair chance that this apple, or at least a part of it, is poisonous. Apple is not immune to the issues its peer tech companies are facing. European Union policymakers have opened two separate antitrust complaints against the company, and U.S. legislators are doing much of the same. The U.S. House of Representatives’ Judiciary Committee recently questioned Apple (and Cook) about its alleged anti-competitive practices. Sociopolitical sentiment in 2019 largely seems to be opposed to big tech. These investigations are representative of that, targeting Apple for its successes in becoming one of the world’s most valuable companies.
Right now, Cook is protecting Apple from the level of scrutiny that has hit Facebook. To do so, AAPL management has painted the company as the nation’s champion of consumer privacy. However, antitrust experts are criticizing the company’s use of privacy to deflect other allegations.
Another source of poison? Massachusetts Sen. Elizabeth Warren has made it clear as part of her bid for the Democratic nomination that she’s opposed to Apple, too. Warren told The Verge’s Nilay Patel that she wants to break up Apple, or at least target one of its practices that she views as anti-competition. Warren (and several others) believe it’s unfair that Apple runs its App Store and distributes its own apps in the store. “It’s got to be one or the other,” Warren told Patel. “Either they run the platform or they play in the store. They don’t get to do both at the same time.”
For now, Apple is safe from elevated criticism. But with the 2020 presidential election looming, investors should note candidate opinions and track antitrust litigation.
Best Stocks: Apple of (Our Readers’) Eyes
It’s really no secret why InvestorPlace’s readers chose AAPL stock. Apple has long been one of the best stocks to buy, and it’s a company with an impressive narrative. With an incredible 2019 performance underway, it looks like 2020 should offer just as impressive growth.
While you still should be mindful of election headwinds, get ready to take a bite out of AAPL stock. It’s going to be a great year.
Sarah Smith is a Web Editor for InvestorPlace.com. As of this writing, she did not hold shares in any of the aforementioned securities.