If you’ve invested in Apple (NASAQ:AAPL), you may well be wondering what all the fuss was with the markets in March. Sure, AAPL stock got hit along with everything else. But despite the fact that iPhone sales continue to trend down and its retail stores were closed for months because of the novel coronavirus pandemic, AAPL recovered. And then it switched right back into growth mode as if nothing had happened. At this point the stock is up 24.5% in 2020. And the company’s biggest product launch in years is still months away.
Two years ago, Apple became the first company to hit a $1 trillion valuation. Other tech giants like Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) soon joined the club, but Apple was the first. With a market capitalization of over $1.6 trillion at this point, and a massive product launch coming this fall, a $2 trillion Apple is within sight.
Of course Apple stock earns an A-Rating in my Portfolio Grader. It’s a high growth stock that also pays dividends, and pours tens of billions of dollars into share repurchases. In fact, RNC Capital’s Robert Muller recently wrote that even without any organic growth, Apple is on track for 4% compounded earnings-per-share growth based solely on its aggressive stock buyback program.
However, you can bet that Apple will be seeing organic growth, especially after this fall’s iPhone event.
5G iPhone 12 Launch
Apple is expected to launch the 5G iPhone 12 series at the end of September. The event may be delayed for a few weeks, and supplies may be constrained at launch — the coronavirus pandemic’s effects on Apple’s China supply chain are still being felt. However, this product launch has all the signs of being a huge one for Apple.
After several years of new iPhones that failed to see large scale upgrades by existing owners, the 5G iPhone 12 is expected to be huge. Instead of just a new form factor, a better camera and performance upgrades (although those will be in place as well), the iPhone 12 has 5G support. This feature, which Apple has fallen behind compared to competitors like Samsung, is in high demand. The move to 5G is projected to put 350 million current iPhone owners into a likely upgrade position.
After several years of declining iPhone sales, a blowout iPhone 12 launch will move the needle on AAPL stock in a big way.
Services and Wearables
In addition to the 5G iPhone launch, Apple has other high performance product lines. Its Services division — including Apple Music, Apple TV+ and iTunes — continues to grow at a rapid pace. In the second quarter, Services set another quarterly all-time high, with revenue of $13.3 billion. Even better, Services revenue is higher margin than hardware sales, and much of it is recurring, subscription-based.
Apple’s Wearables, Home and Accessories division has also been performing extremely well. Led by the popular AirPods and Apple Watch, it generates more revenue than Mac or iPad sales. Despite the challenges of the second quarter, its $6.28 in revenue was up 22.5% year over year.
Apple Moving Toward a $2 Trillion Valuation
Analysts have been increasingly vocal about the inevitability of AAPL stock hitting that $2 trillion valuation.
In January, Wedbush analyst Dan Ives wrote: “We believe by the end of 2021 Apple has potential to be the first $2 trillion valuation given the 5G tailwinds and services momentum potential over the coming years.”
In June, Evercore ISI analyst Amit Daryanani predicted that Apple will become the first company to surpass the $2 trillion mark, although it might take four years. Evercore ISI notes the growth of Services and Wearables revenue, along with “operational tailwinds and buyback support.” So there’s that aggressive Apple stock buyback strategy coming into play again.
Apple’s stock needs to hit $461.89 to reach the $2 trillion market capitalization. Currently trading at over $376, that means a gain of roughly 23% in share price will do it.
Bottom Line on AAPL Stock
I wrote about what an attractive pick AAPL stock was as recently as June 30. Since then? The stock has gained another 2.5% in value.
Up by over 200% over the past five years, and 24.5% so far in a very tumultuous 2020, Apple continues to be on a roll. Any company that can keep performing the way it has despite multi-year slide in demand for its most important product and a global pandemic that shut its retail stores for months is something special. And with the 5G iPhone 12 set to launch this fall, Apple is well on its way to hitting a $2 trillion valuation.
In other words, if you want this A-rated stock in your portfolio, now is the time to make that move.
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.