Many experts agree: Apple is a top stock for 2021
A look around the market reveals that many top experts remain very bullish on Apple. Here is what three of them have been saying about the stock for the next 12 months.
Loup Ventures: top FAANG stock
Venture capital firm Loup Venture says that Apple should be the top performing of the FAANG stocks (“N” is for either Netflix or NVIDIA, rather than “M” for Microsoft) in 2021.
The company notes that fiscal 2022 revenue growth, which is currently expected to be only 5%, should exceed consensus. If Loup Venture is right, the estimate revisions should play out throughout 2021, theoretically lifting the stock price.
Barron’s: one of 10 best
Barron’s is a very closely followed business and finance magazine. Its stock recommendations are often cited as drivers of share price movements.
As I discussed a couple of weeks ago, Barron’s sees Apple as a top pick for 2021. According to it, Apple’s product portfolio is the main reason to be bullish.
The iPhone 12 is cited, as usual. Barron’s mentions that Apple should increase production by 30% in the first half of the coming year. But the rest of the device lineup also deserves some of the spotlight.
Kiplinger: top 15
Kiplinger is still a powerhouse in personal finance. The magazine lists its top 15 tech stocks for 2021, and Apple (barely) makes the cut, at number 15.
According to the publication, the services division is the main appeal of the company and stock. Kiplinger highlights the fact that service revenues are “stickier”, which I also believe to be an important feature of the business model.
Apple’s AR and VR devices: The next big thing?
The rumor mill is churning once again, with Apple’s new VR and AR devices speculated to hit the market in the next few years. Will they be the Cupertino company’s next big thing?
What are we looking at?
According to Bloomberg, “Apple is planning to launch an expensive, niche virtual reality headset ahead of its widely rumored AR smart glasses. The first version will be so expensive that each Apple Store might only sell one each day”.
Apple’s wearable device would not be novel the same way that the iPhone was a pioneer in the smartphone category. Currently, the likes of HTC, Sony and Facebook already compete in the VR space with devices like the Oculus.
The Apple Maven’s opinion
I am less enthusiastic about another VR headset hitting the market than I am about an “Apple Glass” being launched sometime soon.
Augmented reality to the masses has been tried by Alphabet (Google Glass) and Microsoft (HoloLens). Neither tech giant has managed to turn their products into a big hit.
I believe, however, that the first company to go to market with a competitive product that combines quality and accessibility will have a huge advantage in the consumer IT hardware industry for the next five to ten years, at least.
Whether Apple will be this successful player remains to be seen. But if I had to make a bet, my money would be on the Cupertino company.
Apple’s earnings: This is what impressed most
In the 2020 holiday quarter, Apple delivered some of the best financial results ever. The Apple Maven reviews Apple’s three key accomplishments in the period, and counts down to what was most impressive.
3. iPhone sales spike
Sure, iPad sales were up an impressive 41% – the highest growth rate of any product segment in the holiday quarter, by far. But keep in mind that tablets accounted for only 9% of Apple’s total revenues in fiscal 2020.
Among all of Apple’s businesses, what impressed me the most was the iPhone. Growth of 17% was absolutely stunning for a product that already generates a whopping $150 billion in sales per year, on average.
2. Margins expand fast
Apple delivered earnings per share of $1.68, a number that topped consensus estimate by the widest margin ever. One of the keys to such impressive bottom-line performance was margins.
In the holiday quarter, gross and operating margin expanded by 140 and 220 basis points, respectively. The main driver of margin expansion was scale: fixed and other operating costs did not grow nearly as much as revenues, which in turn increased a respectable 21%.
1. China comes back to life
It is impossible not be amazed by revenue growth in Greater China: 57% year-over-year.
The region once accounted for one-fourth of Apple’s total revenues, but the proportion dropped to only 15% in fiscal 2020. For a moment, it looked like what was once a growth engine had become a huge disappointment for the Cupertino company.
Buckle up for the launch of the Apple Car
Apple has recently raised $14 billion through debt, and one of the likely uses of this cash is to develop and launch the Apple Car. Here is what investors should know about this potential new venture.
Get ready for the Apple Car
CNBC has reported that the Cupertino company will likely enter the electric vehicle market via a business arrangement with Korean auto maker Hyundai.
According to the report, Apple will invest $3.6 billion in the partnership. The Cupertino company will likely contribute with software, some of the hardware and connectivity. Hyundai will probably stick to what it knows best: auto parts and assembly.
How much should investors care?
It is not too early to start estimating the size of the EV opportunity for Apple. For example, JPMorgan analyst Samit Chatterjee calculates that first-year production of the Apple Car will reach about 1% to 3% of the global luxury vehicle market around 2025.
However, I would caution investors not to get too peppy about this venture. This is not to say that electric vehicles will not be a growth avenue for the Cupertino company in the future. Rather, I fear that short-term excitement, also known as “market buzz”, could lead to Apple shares rallying too fast on the back of Apple Car news.
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(Disclaimers: the author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)