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).
As the fourth quarter ramps up, Apple (NASDAQ:AAPL) is still captivating our readers — and the rest of the stock market. Its stock price is cheaper and its new hardware is closer than ever before. Currently in third place in the Best Stocks for 2020 contest, can AAPL pull through to win?
The answer to that question depends largely on investor reactions to its upcoming product event. Will Apple debut a new 5G iPhone? What other tech — and what new pricing — will make an appearance? Despite the impact of the novel coronavirus pandemic and a recent tech selloff, expectations are high. As long as the company can deliver, it has a chance of winning in 2020.
Here is everything investors need to know about AAPL stock before the end of the year.
Best Stocks: What Does a Stock Split Mean for Apple?
As InvestorPlace Markets Analyst Luke Lango wrote, Apple looked hot at the end of its fiscal third quarter. It handily beat analyst estimates, mostly thanks to higher-than-expected iPhone demand. Initially, many investors were worried that the pandemic would squash the need for smartphones. Without commutes, social events and the general need to leave the house, would consumers stop upgrading their phones? Not at all.
In fact, revenue from iPhones actually increased for the quarter. Demand started to rebound from the worst months of the pandemic, and a new, low-price iPhone SE model drove sales. Turns out consumers still want new tech during a pandemic, they just want slightly cheaper models.
While the stellar earnings were a plus for AAPL stock, a 4-for-1 stock split was perhaps the biggest news.
So what is the big deal with the stock price? Well, Apple has a history of performing well after stock splits. Plus, trading at a share price well over $400, Apple stock was not necessarily accessible to newer investors. A bit like the price action we saw with Tesla (NASDAQ:TSLA), which similarly split its stock at the end of the quarter, investors dove in. Driven on by a rise of interest from trading platforms like Robinhood, these stock splits became a symbol of affordability and new blood in the market. Existing investors upped their stakes to ride the high, and new investors suddenly had enough cash to buy shares.
Talk about a win-win situation.
Since then, Apple has not had a perfect ride. A selloff in tech — which similarly hurt peers Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) — combined with a generally weak September, brought shares back down. But moving forward, a lower price could continue to catalyze buying. If we see a second round of direct stimulus payments from the government, keep a close eye on AAPL stock.
New Services Boost the Long-Term Appeal of AAPL Stock
Apple enthusiasts know that September is typically a big month for the company. Last year, the company unveiled three models of the iPhone 11, a new smartwatch and its Apple Arcade service. This year, it was supposed to release its 5G-enabled smartphones. That is, until the pandemic happened.
Although the company delayed the hotly anticipated launch, the 2020 September event was from a story of disappointment. Instead, a series of new services got investors excited about the future.
If you remember previous Best Stocks updates on Apple, you will recall that services have become a much larger part of the narrative for the tech favorite. CEO Tim Cook said the services division is a key area he wants to keep investing in.
Just a few weeks ago, Apple took a big step forward in this services investment. It unveiled the Apple One subscription bundle, which combines services like Apple Arcade, iCloud storage, Apple Music, Apple TV+ and Apple News. It offers three tiers, designed around individual, family and premier models. Importantly, bundled subscriptions allow customers to save on per-app purchases, and play on desires for greater convenience.
There is an even bigger hook for investors, however. As Julia Alexander wrote for The Verge, Apple is working to make its ecosystem an even tighter web. As it weaves its services together with competitive pricing, customers may become even more reliant on the company. Once they have the bundle, Alexander said it is less likely they would opt for an outside service, like music streaming from Spotify (NYSE:SPOT).
And, instead of just bundling up its existing services, Apple also introduced a new offering. Its Apple Fitness+ subscription will pair with its devices like the Apple Watch, providing personalized workouts and instructions from skilled trainers. On the day of the announcement, stay-at-home fitness rival Peloton (NASDAQ:PTON) saw its stock fall.
As we have seen with Amazon, Wall Street rewards companies that work to dominate across several areas of expertise.
5G iPhones May Be Closer Than Ever Before
Not satisfied by Apple One? Well, you may be in for a treat this week. Apple has announced another shareholder event for this Tuesday, and this one will feature updates on its iPhones.
So what should you expect? It is not entirely clear. In invitations for the event, the company used the phrase “Hi, Speed,” leading many enthusiasts to believe this is the real deal. It could join the 5G club, announcing that its iPhone 12 models are part of the next-generation wireless network that has become a major trend in 2020. Rivals like Alphabet, Huawei and Motorola (NYSE:MSI) already offer 5G-enabled phones, but the rollout of the tech is still underway. The new network requires quite a bit of new infrastructure. For Apple, this could mean that an October 2020 iPhone release would give it plenty of time to ride the 5G high as it grows in popularity and accessibility.
Another specific event feature could be the unveiling of the iPhone 12 mini. Rumors about this product are swirling, specifically that it would be another lower-price option. InvestorPlace analyst Louis Navellier wrote recently that such a model would be a big deal for AAPL stock. With an alleged price of $649, the iPhone 12 mini would come in below the iPhone 11 models from last year. Pandemic-driven cuts to consumer spending could make this phone an instant winner.
Plus, for less cost-conscious customers, the more expensive 5G models could usher in what analysts see as an upgrade “supercycle.” Everyone will want the newest, highest-tech devices. Apple has a great deal of brand loyalty and sleek products, meaning that for 5G, it may be the best consumer bet.
Leading up to Tuesday, keep a close eye on the news. Beyond rumors of 5G and lower-price phones, enthusiasts are also predicting updates on its augmented reality glasses, smart home speakers and new over-the-ear wireless headphones.
Bottom Line: Apple Is One of the Best Stocks in 2020
Do you want to know why Apple is really one of the best stocks to buy this year? The pandemic has tried to do its worst, even initially disrupting supply chains and causing product delays. Despite all that, the company has managed to generate positive sentiment and announce several exciting updates.
By the end of the quarter, AAPL stock had gained almost 60% year to date. It may not rival volatile biotech names in the coronavirus vaccine race, but it sure is outperforming the S&P 500 and the Nasdaq Composite. Apple has been, is, and will continue to be a stock market winner. Anyone who denies that potential is missing out on whatever the company has in store.
It looks like our readers are right. You don’t need AR glasses to see that Apple stock is a buy here.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer for InvestorPlace.com.
