Apple (NASDAQ:AAPL) had an impressive run in 2019, climbing 101% over the past 12 months. Some might think the run is over for Apple — with a market cap in excess of $1 trillion dollars, how much more can it grow? But analysts at Wedbush remain bullish on AAPL stock at the start of 2020.
Specifically, in a note to clients on Jan. 8, Wedbush analysts Daniel Ives and Strecker Backe reiterated their “outperform” rating. They project a 12-month price target of $350 for the stock (nearly 15% upside from current levels) and a price of $400 for their “bull case valuation scenario” (30% upside).
While these projected numbers might not match Apple’s 2019 gains, they’re still impressive for a company of this stature. If Ives and Backe are right, then AAPL will still be worth a buy at the start of 2020.
With that in mind, let’s dive into two big reasons why you shouldn’t count AAPL stock out in the new year.
App Store Strength Synergizes Well With iPhone Sales, 5G Catalyst
Ives and Backe cite continued strength in the Apple App store as a key reason Apple will keep powering higher throughout 2020. Apple reported customer spending in the App Store of $1.42 billion during the holidays. That ultimately led to a 16% increase over the prior year. According to the Wedbush analysts, this figure gains further significance when you consider impressive AirPods sales numbers, which they project to be 11 million units greater than their initial expectation for 56 million AirPods sold.
In the words of Ives and Backe, their renewed estimate of 67 million AirPods sales “speaks to the underlying strength that Cupertino is having monetizing its golden jewel installed base of 925 million iPhones worldwide heading into FY20 and beyond.”
These figures ultimately support the greater bullish narrative surrounding AAPL stock that will solidify in the years ahead as the company taps into the “350 million iPhone customers in the window of an upgrade opportunity” amid the increased adoption of 5G-enabled technologies.
“We believe the services business and this linchpin annual revenue stream which is poised to hit $60 billion by FY21 is worth between $500 billion to $650 billion,” state Ives and Backe. “[M]id teen growth on the services business remains front and center as the core fuel in the engine for Apple as the company has the 1-2 punch of a 5G super cycle and a services business which is now starting to be properly valued by the Street.”
All of this comes ahead of an upcoming earnings report from Apple on Jan. 28 after the market close. If the assessment from Wedbush proves accurate, then we might expect an impressive turnout for the report. That could ultimately lead to significant short-term gains. Combine the possibility of short-term strength with their underlying long-term thesis about the impact of 5G and its services business, and it’s clear that Apple stock still has plenty of room to run in the years ahead.
But that’s not the only reason for optimism toward AAPL this year.
Easing of U.S.-China Trade War Tensions
Adding fuel to the bullish fire, the company seems to be recovering from the impact of the U.S.-China trade war. That conflict put many stocks through the wringer in 2019.
Apple reached record highs Jan. 9 after news broke that “iPhone shipments in China jumped more than 18% in December.” The rising strength of Apple in China is further reflected in the fact that shipments of mobile phones in the massive country had dropped off by 6.2%. So mobile phone shipments to China are declining, but the popularity and purchase of Apple products is increasing.
While other tech companies are still picking themselves up from all the trade war madness, AAPL seems to have moved on from the threat. The continued adoption of their products in China over other phone options is a strong sign of things to come. And once a trade war resolution solidifies, faith in the company’s prospects in the region should be fully restored if they haven’t been restored already.
Bottom Line on Apple Stock in 2020
It will take plenty of time to see how things turn out for Apple. Its upcoming earnings report could be a dud. The adoption of 5G could be much slower than anticipated. New drama could change the outlook of the trade war. But as InvestorPlace.com contributor Thomas Niel points out in his breakdown of the Wedbush note, the company has much more going for it than just these promising catalysts.
I agree with Niel’s overall assessment.
Apple’s stock price might not soar 100% higher again this year, but there are still plenty of reasons for optimism. If you’re looking for a reliable bet in uncertain times, then put Apple stock at the top of your list.
It’s just a matter of when to buy, not if.
Robert Waldo has been a web editor for InvestorPlace since 2016. As of this writing, he did not hold a position in any of the aforementioned securities.
