Apple Inc.'s (AAPL) stock plunged 18% off its highs this spring as slowing iPhone sales prompted many on Wall Street to say the company's growth days are over. Since then, Apple's shares have staged a remarkable rebound, rising 50% year to date as sales of the iPhone 11 beat expectations and amid raised forecasts for both its new entertainment streaming service and its share price.
Apple's gain has created a striking divergence from its fellow FAANG stock members, all of which once were regarded as growth stocks. But today, Facebook Inc. (FB) shares have dipped near 10% off their 52 week high, while Amazon.com Inc. (AMZN) is lower by more than 14%, Netflix is down about 27%, and Alphabet Inc. (GOOGL) is down 5%. The Wall Street Journal detailed the trend in a recent story.
The optimism about Apple is partly due to the role that Apple's traditional core business, iPhone hardware sales, will play in igniting the company's expansion into services. CEO Tim Cook sees services as Apple's next growth opportunity. With that in mind, Wedbush Securities analyst Daniel Ives expects Apple's customer base of 900 million iPhones to help its streaming service add as many as 100 million customers over the coming three to four years
Apple, the only true hardware company out of the FAANG bunch despite its new focus on software, is set to launch streaming platform Apple TV+ in the next few weeks. This on-demand service will put it in competition with Netflix, Amazon, and legacy industry leader Walt Disney Co. (DIS), among others.
Ives expects Apple TV+ to bring in roughly $15 per share to Apple’s bottom line. The new growth business, alongside healthy demand for iPhones, would make Apple stock more attractive from a valuation perspective, according to Ives at Wedbush. He has lifted his price target on Apple from $245 to $265.
Canaccord analyst T. Michael Walkley is also bullish, lifting his price target to $260, per Barron’s. Walkley said that his research shows that the iPhone leads at all four major U.S. wireless carriers, and that demand for the iPhone 11 should help earnings come in at the high end of the expected range for the quarter.
To be sure, the sheer scale and global reach of Apple leaves it vulnerable to headwinds. In Hong Kong, where protests against the Communist Party have broken out, the company is faced with a dilemma over profits and values in a country that accounts for roughly 20% of revenues, per the Financial Times. After Chinese state media criticized Apple, CEO Cook banned an app in Hong Kong that allowed pro-democracy protesters to track police whereabouts. Apparently, Cook concluded that Apple couldn't risk losing sales in China, the world's most populous nation.