Apple Stock Just Keeps Climbing!

Major Tailwinds for Apple iPhone 12 Launch!

Apple Inc. (NASDAQ:AAPL)

Prelude .....

Apple has delivered market-beating gains for investors, but this top tech stocks is poised for more gains. Apple is powering some of the most in-demand consumer products this season. That's just the start of why this stock is a compelling buy right now.

The Major Catalysts for This Apple Stock.....

1. Major Tailwinds for Apple’s iPhone 12 Launch.....

After the various headwinds associated with the coronavirus delayed the release of Apple’s iPhone 12, the new smartphone was finally unleashed on the market on October 23.

The new iPhones offer 5G connection speeds, which could trigger a healthy upgrade cycle, although 5G coverage remains spotty right now. 

Apple stock moved up 5% Tuesday after Nikkei reported that Apple plans to make up to 96 mil iPhones in the first half of 2021, a 30% year-over-year increase.

2. Analysts Upgrades for Apple Stock.....

According to Wedbush analyst Daniel Ives’ latest checks, there is robust demand for the new handset, both domestically and in the key Chinese market. In fact, the analyst thinks the Street is underestimating the expected sales for Apple’s flagship product.

“With more order activity kicking in over the last few weeks for iPhone 12 our initial reads are very bullish and give us incremental confidence in our supercycle thesis on iPhone 12,” the 5-star analyst said. “While the Street is forecasting roughly 215 million iPhone units for FY21, we believe based on the current trajectory and in a bull case, Cupertino has potential to sell north of 240 million units which would eclipse the previous record of 231 million units sold in FY15.”

Ives estimates Apple’s supply chain is expecting the delivery of 80 million iPhone 12s during the initial launch period, with the potential to even reach the mid 80’s.

The analyst was anticipating 75 million units as the “line in the sand,” and already eight weeks ago, the figure was “in the 65 million to 70 million range.”   

“We have not seen a launch uptrend such as this in a number of years for Apple and the only iPhone trajectory similar would be the iPhone 6 in 2014 based on our analysis,” Ives noted.

Taking the lead times on Apple’s website as an indicator, Ives says “pre-orders tracked more than 2x its predecessor iPhone 11 thus far.”

And with demand in the “key china region” looking “very healthy,” Ives believes this will be the “strongest product cycle for Cook & Co. thus far since iPhone 6 in 2014.”

Accordingly, Ives rates Apple stock an Outperform (i.e. Buy), while lifting his price target from $150 to $160. The new figure suggests upside of 63% over the next 12 months.

The stock has a Moderate Buy consensus rating, based on 23 Buys, 6 Holds and 1 Sell. According to the $131.39 average price target.

3. Growing Lucrative Services Business.....

Apple is also growing its lucrative services business. It continues to invest in streaming with Apple TV+ and will launch Apple Fitness+ on Dec. 14. Revenue from services -- including Apple Music, Apple Card, Apple Pay, News+, Arcade, iCloud, the App Store, Apple TV+, and AppleCare -- comprised 22% of the business in the most recent quarter and is Apple's fastest-growing revenue stream.

All of these products and services lead to billions in cash flow. That allows Apple to invest in the future while also returning cash to shareholders through dividends and buybacks.

Apple generated $73 billion of free cash flow in fiscal 2020, which currently funds a quarterly dividend payment of $0.205 per share.

Apple’s brand power is unrivaled, and its growing installed base of 1.5 billion active devices gives it many levers to drive growth through product upgrades, app sales, and other services.

Apple's business strategy is just as beautiful as its products. It has long touted the ease with which its’ Macs, iPhones, and iPads play well together over iCloud. iPhone is the cash cow, driving over half of Apple's $274 billion in revenue in fiscal 2020. But Apple has continued to strengthen the bond between users and the iDevice ecosystem by adding ancillary products, such as Apple Watch, AirPods, and the HomePod smart speaker.

Each new product release is a layup sale, given that customer satisfaction rates among iPhone users remain very high, which can lead to additional product purchases. For example, Apple just launched the new AirPods Max headphones, which retail for $549 and already have a wait time of three months for delivery.

Summary.....

Apple’s Services and Wearables businesses are expected to drive top-line growth in fiscal 2020 and beyond. Although its business primarily runs around its flagship iPhone, the Services portfolio has emerged as the new cash cow. The company's focus on autonomous vehicles and augmented reality/virtual reality technologies presents growth opportunities in the long haul.

Apple stock has an expected earnings growth rate of 22.3% for the current year (ending September 2021). It has a long-term (3-5 years) growth rate of 11.5%. The Consensus Estimate for the current year has improved 0.3% over the last 90 days.

The blue-chip giant is the No. 1-performing Dow Jones stock for 2020, with a 66.7% advance through Friday.

Therefore…..

Will Apple Stock Continue to Climb?

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