When it comes to Apple (NASDAQ:AAPL), there’s one thing you can always count on. Innovation. Apple’s innovation is why it’s one of my favorite companies, and why my bullish rating on Apple stock is looking pretty good today.
Like the rest of the world, Apple’s employees are hunkered down in their homes. But they’re still working, innovating and preparing some pretty awesome products to release later this year.
Those products will be huge catalysts for Apple stock. And happily for investors, there is a ton of upside left.
Here are some reasons why I’m really excited about the company these days, and why Apple stock gets an A rating in my Portfolio Grader.
The Coronavirus Won’t Stop Apple Stock
Granted, Apple saw some pretty big losses earlier this year. The novel coronavirus affected China first, knocking out the company’s production facilities. Apple lost about $200 billion in valuation in the last month as its market capitalization shrunk to $1.1 trillion.
Apple saw its iPhone sales fall by 28% in China just in January, and collapse by 60% in February. The company withdrew its 2020 guidance and issued a warning to shareholders that the coronavirus may limit sales and disrupt iPhone demand and supply.
For the fiscal second quarter that ends in March, Apple could see iPhone orders drop 18%.
But that doesn’t keep Apple from working harder to bounce back. In March, the company shut down much of its mammoth campus in Cupertino, California. Then it turned its employees loose to work at home on Apple’s most compelling and secretive products.
That’s a big move for a company that prides itself on secrecy.
Apple’s Top-Notch Engineers
Can you imagine living next door to an Apple engineer these days, not knowing that they are turning the 5G iPhone or the next iteration of the Apple Watch into a reality just a few yards away? Because that’s what’s happening right now.
“Taking home a future product requires the green light from the vice president of an employee’s organization. That list of staff with future devices at their homes also is sometimes reviewed by Apple’s senior vice presidents, the management team run by Chief Executive Officer Tim Cook. As part of the work-from-home order, Apple has clamped down on which employees are allowed to take home future versions of software, including the next release of iOS, the platform that runs the iPhone and iPad. Like with hardware, employees working on unreleased software, such as the upcoming iOS 14, require approval from the highest levels of the organization.”
As of now, Apple is still expected to release its next iPhone model this fall, including a 5.4-inch version, two 6.1-inch models and one 6.7-inch model.
And it’s releasing tantalizing details about other new products, including the Apple Watch Series 6, which will reportedly be able to measure your blood oxygen level.
The company is also on course to launch an updated version of Apple TV and its HomePod 2 smart speaker.
Apple Is Still Driving 5G Technology
Apple’s next iteration of the iPhone is widely expected to have 5G technology. That is a hugely exciting development — and my loyal readers know what I think of 5G technology.
In short, 5G technology is huge because it is 100 times faster than 4G. That will allow you to have a Wi-Fi experience that’s just as good as if you were plugged in to a network. Plus you’ll get super-fast downloading times and great video streams.
You’ll also see things completely revolutionary, such as virtual reality healthcare services. And in this day and age of pandemics, the ability for a nurse or a doctor to assess a patient with video quality as crisp as an in-person assessment is critical.
While there is mixed reporting about whether Apple’s iPhone 12 will be delayed, the phone itself is expected to be a big seller.
Reports indicate that it will complement its new camera technology with a LiDAR 3D scanner, which could provide a game-changing user experience.
So why is this important for investors? Well, dramatic innovations will create buzz among iPhone aficionados. More consumers will upgrade to the newer devices. And, the buzz will allow Apple to charge a premium price.
Services Will Continue to Drive Apple Stock
If you’re among the millions of people following stay-at-home orders, you know how important your smartphones and tablets. These devices help consumers stay connected to the outside world.
You’re using Apple Music and buying stuff on the App Store more than usual right now. And that’s the type of user behavior that boosts Apple stock.
Apple’s Services division is a growing segment of Apple’s profitability, accounting for $12.7 billion in revenue in the company’s fiscal first quarter.
And Services is important for Apple because it’s a high-margin business. The company charges fees to content developers who sell their products through Apple’s Services segment. It enjoys much bigger profit margins from App Store or Apple Music purchases than it does from smartphones or its entertainment division.
There are 1.5 billion active devices around the world that use Apple’s services, up 100 million from the end of 2018. Investors should expect to see another increase in both revenue and usage in fiscal Q2 and beyond.
The Bottom Line
Apple stock is currently down 18% year-to-date but the upside is much bigger. The consensus price target of $316 gives investors more than 30% upside right now.
And Apple stock won’t stay depressed for long. Investors really don’t want to miss out on this fantastic long-term potential.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.