- In 75% of previous instances, Apple split its stock at under half the price of its current value.
- The maker of iPhones is expecting a 5G supercycle in 2020.
- Apple is also viewed favorably on Wall Street with more than 80% of analysts issuing a buy rating on the stock.
If the stock of the iPhone-maker mimics its 2019 growth, Apple could be heading for a split in 2020, six years after the last one. So far, all the stars are lining up in Apple’s favor, increasing the chances that the stock could go up further still. Even Wall Street seems to be in near-total agreement.
Buy Buy Buy!
Among Wall Street analysts, there are 23 buy ratings compared to just five sell ratings. The buy ratings have grown by four from a quarter ago. This contrasts sharply with an increase of just one sell rating over the same period, according to The Wall Street Journal.
The most recent bullish comment comes from tech analyst Gene Munster of Loup Ventures. He recently stated that the stock is undervalued by over $100, meaning it could rise to over $400 should his prediction materialize.
At its most recent stock split in 2014, AAPL was trading at around $650. Other stock splits have happened when the stock was valued lower (without adjusting for inflation, though). In 2005, the stock split when it was valued at $90. Two decades ago, Apple split at a price of $111.
There are at least three factors that make another stock split likely in the near future.
1. One of Apple’s biggest risks is off
China is Apple’s biggest market outside the US. It’s also an important manufacturing center for the iPhone-maker. As such, the U.S.-China trade war threatened to significantly disrupt Apple’s operations. But now that risk seems to be off for the foreseeable future. President Donald Trump recently indicated he will sign a “Phase One Trade Deal” mid-month.
Although talks can still break down in the future, this being a general election year prevents Trump from taking action that could jeopardize his record on the economy and therefore his reelection chances.
2. A supercycle is coming
This year Apple is expected to unveil an expanded lineup of iPhones. Instead of launching the typical three iPhones, at least five versions will be released in 2020.
A line-up of iPhones at different prices increases Apple’s addressable market. Cheaper iPhones will rope in more people into Apple’s walled garden and thereby grow its services business even further.
For the premium-priced iPhones, there will be an added incentive to upgrade or purchase 5G technology. The rollout of 5G networks is expected to result in a supercycle, something the iPhone hasn’t enjoyed recently. Wedbrush analyst Daniel Ives estimates Apple’s iPhone revenues will grow by over 10% in 2020.
3. Apple is cheap relative to FAANG stocks
Compared to other FAANG stocks and even Microsoft (NASDAQ:MSFT), Apple is relatively cheap in terms of its price-to-earnings ratio. Currently, its trailing P/E ratio is 24.7. This contrasts sharply with Netflix’s (NASDAQ: NFLX) P/E ratio of 103 and Amazon’s (NASDAQ:AMZN) P/E ratio is 81. Facebook (NASDAQ:FB) has a P/E ratio of 32.8 while Alphabet’s (NASDAQ:GOOG) is at 28.7.
Compared to other tech stocks, the Dow’s best performer in 2019 possesses even more upside potential.
Last modified: September 23, 2020 1:27 PM