Despite all the chaos in the stock market this quarter, investors have been able to count on a few certainties. You’re likely reading this on an iPhone or a Mac, perhaps an iPad. And if you’re not, chances are one of those devices is present in your household.
That reality has helped Apple (NASDAQ:AAPL) cinch the No. 2 spot in InvestorPlace.com’s Best Stocks contest.
However, there’s a lot happening behind that success. For starters, the novel coronavirus is redefining the company’s role. What do I mean? Well, in fall 2019 shares flew high on the back of a September product launch and hopes for 5G devices in 2020. Apple essentially dominated the market. Now, particularly among our Best Stocks contest picks, it shows potential for hope even while the S&P 500 remains down for the year.
This hope comes from Apple’s reputation as one of Silicon Valley’s “Big Tech” icons, with behemoths such as Facebook (NASDAQ:FB) and Microsoft (NASDAQ:MSFT) its main peers. Breaking it down further, AAPL stock represents both stability and innovation. Investors can rely on its potential, and the popularity of its staple consumer tech. But the company isn’t backing down from innovation and market-leading moves either.
Although Apple is far off the No. 1 spot, don’t count it out just yet. This mix of stability and innovation gives it a lot of power headed into the second half of the year.
It’s All About the Coronavirus … Still
In real estate, they say that what matters most is location, location, location. Right now in the stock market, it’s all about coronavirus, coronavirus, coronavirus. That hasn’t changed since the first quarter, when I shared how several pandemic catalysts were influencing AAPL stock.
Apple started an unfortunate trend in early February, moving to close its brick-and-mortar locations around the world. After long lockdowns, those stores started to reopen. But now, as cases rise in states like California, Texas and Florida, the company has made the difficult decision to close certain locations again. Will we ever get out of this cycle?
Another worry at the end of the first quarter was the supply chain. Would Apple’s reliance on China, Malaysia and Israel for key iPhone parts hurt the company? And would it be able to launch the 5G-based iPhone 12 models on time? Those questions still linger here at the end of the second quarter.
There are a few other pandemic catalysts to keep in mind. As we head into the third quarter, and as the coronavirus continues to dominate the market, keep an eye on the company’s Apple TV+ and the power of its streaming entertainment. It’s likely that by the next Best Stocks contest update, we’ll have a few more answers.
Apple’s Stability Gives It Serious Market Power
It’s hard to answer some of the most pressing pandemic-focused questions. But it’s not hard to look at Apple and see that the company offers serious stability in a high-tech world. The company has a market capitalization of almost $1.6 trillion. And still, shares have managed to gain 25% so far this year.
InvestorPlace analyst Louis Navellier said it best. Apple has a diverse business model, it continually posts solid earnings and it’s proven itself a resilient company. He recently wrote:
“Apple has shown its resilience and ability to put together growth even in the most trying circumstances. The company also remains committed to paying dividends and aggressively buying back shares. In its latest earnings reports that was a dividend of 82 cents per share, and another $50 billion committed to share buybacks.”
In this market, a commitment to dividends is enough of a reason to buy. But Apple offers much, much more. Although supply chain concerns still linger, it’s likely the new 5G iPhones will hit shelves in September. Consumers have long been waiting for these devices, especially as experts hype the revolution 5G brings. As iPhones are often synonymous with smartphones, many consumers will eagerly upgrade to have next-generation tech from a household name.
Here you really see the stability. A pandemic has disrupted basically everything, but Apple is figuring out how to strengthen its supply chain and deliver a new iPhone on schedule. That’s why Wedbush analyst Dan Ives is increasingly bullish on AAPL stock. He repeated his “outperform” rating and set his 12-month price target to $425. However, he also outlines a “bull case” target of $500.
At that price, Barron’s Eric Savitz writes that Apple would become the first company to surpass $2 trillion in market cap.
Apple is taking its signature, reputable iPhone and creating a new path forward. Thanks to 5G, this staple of consumer technology will soon represent a whole lot more. It will also likely lead to huge share-price growth for the company.
Innovation Will Keep Driving AAPL Stock Higher
Once again, Navellier said it best. Although he’s a big fan of its standard product line-up, he also recognizes the potential it has in the pipeline. He wrote:
Don’t forget, despite its broad range of products and services, Apple always has more irons in the fire. The ones we know of range from AR glasses to self-driving cars. Any one of these could hit production and even if it’s not the next iPhone, it could be the next AirPods.
As with other Big Tech companies, it’s hard to predict exactly when one of these futuristic devices will be ready for its public debut. But we do know about a few of Apple’s recent innovations.
Perhaps the biggest news is that Apple is finally breaking away from a long-time partnership with Intel (NASDAQ:INTC). Instead of relying on the chipmaker for its Macs, it will use its own in-house silicon, like it does for iPhones and iPads. The first of its Apple-powered Macs will be ready before the end of this year, but as Axios’ Ina Fried reports, the full transition will take two years.
Fried is clear that such a transition will create a few hiccups for both Apple and its consumers, but there are clear pros to the move. It gives Apple more control over its supply chain, it will help it cut costs and it should also allow for better hardware and software integration. In other words, it’s an exciting move that will have even more exciting impacts in the long term.
There were a few more innovation-focused announcements in the second quarter. As InvestorPlace’s Ian Bezek highlighted recently, Apple continues to partner with Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) on a contact tracing solution for the coronavirus. Plus, Apple has long been making moves into the healthcare world, including with its Apple Watch devices.
And although the details of the deal are unclear, it’s worth noting that Apple recently acquired NextVR, a virtual reality startup. As The Verge’s Nick Statt wrote, Apple is working on a pair of augmented reality glasses and a headset. He also speculates that NextVR could in some way link up with its Apple TV+ service. Regardless of the outcome, this deal is one to watch.
Best Stocks: No. 2 Apple Could Still Be the Winner
Apple really does do it all. Its consumer devices like the Apple Watch, AirPods, iPhone, iPad and its Mac computers are staples in many households. They give the company stability and its services business is masterfully weaved into this device ecosystem. Plus, with 5G devices just around the corner, many consumers will likely be headed to the store to make an upgrade.
On top of that, it still churns out innovative efforts that are worthy of investor attention. It is taking control of its supply chain (particularly relevant given the coronavirus and U.S.-China trade war), and investing in hot topics like virtual and augmented reality.
At the end of the day, AAPL stock looks pretty good in the No. 2 spot. But I’m betting Apple still has a solid chance at winning the InvestorPlace.com Best Stocks contest this year.
Sarah Smith is a Web Editor for InvestorPlace.com. As of this writing, she did not hold shares of any of the aforementioned securities.