Editor’s note: This article is a part of InvestorPlace.com’s Best Stocks for 2020 contest. The Readers’ Choice pick for the contest is Apple (NASDAQ:AAPL).
When InvestorPlace readers expressed their confidence in Apple (NASDAQ:AAPL) stock, they probably didn’t anticipate the current level of global chaos. It’s certainly one of the best stocks in 2020, but with a year-to-date loss of almost 14%, is that saying much?
At the end of 2019, Apple was in a great spot. It had wildly surpassed analysts’ expectations and shot up over 85%. This stunning performance made it the star of the Dow Jones Industrial Average. Second-place Microsoft (NASDAQ:MSFT) was far behind with a 58% return.
Low expectations for the iPhone 11 turned into a surprise holiday rally. And Apple’s AirPod Pros proved to be the icing on the cake for the company wrapping up the year.
So what happened? Why were InvestorPlace readers so hot on the name? And can Apple still be one of the best stocks in 2020?
Apple Is Still One of the Best Stocks for 2020
Let’s review what our readers were rooting for going into 2020 — and trust me, there was a lot. After the iPhone 11 beat expectations, analysts were bullish on Apple’s products. Big rumors were swirling at the end of the year about 5G iPhone models.
Investors and analysts alike were eager for these new phones. They were certain the new tech — combined with the widespread rollout of 5G in 2020 — would be a big catalyst for sales. As I noted at the start of the best stocks contest:
“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.”
These 5G phones weren’t the only shining stars in the company’s future.
Investors were also excited about the rise of Apple’s services revenue. Fiscal fourth-quarter services revenue had come in at an all-time high of $12.5 billion. InvestorPlace contributor Laura Hoy predicted an iPhone subscription model that would keep sleek new models coming to consumers’ mailboxes.
But with the world in panic thanks to the novel coronavirus, where do these catalysts stand?
Well, at the end of January, Apple reported an all-time high for its overall revenue and its broken-out services revenue. The big figure came in at $91.8 billion, sending AAPL stock to highs near $320. Although services revenue missed estimates for $13.1 billion, it did still increase quarter over quarter to $12.7 billion.
When the world returns to normal, so will this trend of extremely positive growth. And the story with 5G is no different. Apple is still on track to release its new models in the second half of 2020. As long as that timeline doesn’t change significantly, this major tech theme will boost AAPL stock.
The Coronavirus’ Impact on AAPL Stock
As alluded to earlier, much of the suffering behind AAPL stock this year is due to the coronavirus from China. And a big part of the problem is the fear associated with the virus.
The coronavirus, and Covid-19, the disease associated with it, are surrounded by unknowns. No one knows how many people will die, when the virus will clear up or what treatment will prove most effective.
In response to the numerous unknowns, governments are shutting businesses down. Currently, much of the world is on lockdown. Just Monday, several more states in the U.S. issued stay-at-home orders, forcing Americans to stay inside.
In many ways, Apple led the market in this situation. On Feb. 17, it became one of the first companies to amend its previous guidance.
Initially, shutdowns in China hurt Apple because of its deep manufacturing ties to the nation. Then, pandemic concerns led Apple to close its retail stores around the world. Slower production and decreased sales are both headwinds weighing on this best stocks candidate.
But fundamentally, Apple is still the strong company it was before the coronavirus. The iPhone is still ubiquitous, as are its AirPods and Mac laptops. If anything, the services associated with those devices — like contact-free payment and music streaming — are becoming even more popular.
And although Apple TV+ is not the largest driver of revenue for the company, it’s important to note that analysts are bullish on streaming names now. It’s hard not to be, knowing there are millions of people stuck at home without anything better to do. Plus, the service is making news with soon-to-debut British comedy offering Trying.
Sit back, scroll through your iPhone and stream your favorite TV show or movie. Apple, and AAPL stock’s success, aren’t going anywhere.
Apple’s Secret Weapon in 2020
InvestorPlace Markets Analyst Luke Lango said it best. Apple “has weathered every financial and economic storm since 1985.” And there’s no reason this market downturn will be any different.
Historically, those who bet against AAPL stock have lost money. Lango writes:
“With over $100 billion in cash, Apple is equipped with enough resources to weather the current storm, even if it drags on for several quarters. Even further, the company has huge catalysts on the horizon (including a 5G iPhone launch towards the end of the year), and its production facilities in China are coming back online.”
It’s safe to say that one of Apple’s secret weapons — and one of the factors making AAPL one of the best stocks in 2020 — is its cash balance. But there’s something else that makes InvestorPlace readers hot on the name. Apple continues to be innovative.
Although the coronavirus is certainly weighing on Apple shares in the short term, the company is still finding new ways to help serve people’s needs. It recently released an app and website that enforces the Centers for Disease Control and Prevention’s guidance.
Users can treat this app like a screening tool, reporting their symptoms, risk factors and recent exposure. Then, based on CDC guidance, Apple’s new offering will provide recommendations on next steps.
As hospitals in the U.S. reach capacity and panic mounts, Apple’s innovation in the healthcare space proves that not only is it one of the best companies of all time, but that it’s still on track to be one of the best stocks in 2020.
Investors just need to ride out the short-term volatility.
Sarah Smith is a web editor for InvestorPlace.com. As of this writing, she did not hold a position in any of the aforementioned securities.