Apple (NASDAQ:AAPL) closed out 2019 with a stock that's nearly 90% higher than where it started the year. That made it the best-performing Dow stock of 2019.
Yet even though Apple shares reached an all-time high above $300 this week, there doesn't appear to be an end in sight to the stock's ascent. Price targets on the iPhone maker keep climbing, with the high standing at $350 a share. Among the Wall Street analysts who cover Apple, the buy and outperform ratings outweigh the holds, underperforms, and sells.
Behind the optimism are several growth stories for the FAANG stock that should drive revenue growth and share price appreciation in the year to come. Here's a look at the big ones.
Apple's iPhone returns to growth
Apple started last year with an earnings warning, citing lackluster demand, particularly in China. That sent shares plummeting and Wall Street revisiting its future estimates for Apple. But the launch of the lower-priced iPhone 11 in the fall has appeared to breathe new life into the replacement cycle for Apple phones, which has become elongated in recent years.
Heading into 2020, there will be another reason to upgrade a smartphone: 5G. The launch of the first 5G iPhones in 2020 is expected to return the business to growth, giving consumers a real reason to pay up for a new smartphone. Consumers have also been holding on to their smartphones for longer, making 2020 a prime replacement year. Put those two factors together, and the iPhone might have a "supercycle," as Wedbush analyst Dan Ives recently predicted. In that scenario, there is a potential market of 350 million iPhone owners who could be looking to upgrade.
But it's not only a 5G iPhone that's expected to drive growth. Apple is reportedly gearing up to launch one or two Apple SE 2 models, which are rumored to be cheaper devices that would run on its latest processor. With a wider lineup of phones, Apple can cater to more types of consumers.
Wearables to have a big year in 2020
Renewed consumer interest isn't reserved solely for the iPhone; the AirPod wireless earbuds and Apple Watch continue to enjoy strong demand, too. With Apple gearing up to report its results for the fiscal first quarter -- which includes the holiday selling season -- analysts anticipate it announcing a strong showing for both devices. That momentum is expected to be a big story in 2020, one that Citigroup analyst Jim Suva predicted will surprise investors and help the stock remain near his $300 price target.
Citigroup isn't alone in predicting robust demand for AirPods in 2020. Longtime Apple analyst Toni Sacconaghi of Bernstein thinks Apple could sell 85 million AirPods this year, raking in around $15 billion. The analyst noted that if the recent rate of growth in AirPods sales were to continue in 2021, AirPods would become Apple's No. 3 product line by revenue.
Apple keeps on weathering the trade war
One of the reasons why investors have rewarded Apple over the past year is the expertise CEO Tim Cook has displayed when navigating the trade war between the U.S. and China. Instead of being adversarial with President Trump, Cook has befriended him. Cook is on Trump's Workforce Policy Advisory Board and recently toured a plant in Texas with the president. That relationship has helped Apple weather the protracted trade war relatively unscathed.
If history is evidence, more of the same is in store for 2020. Apple recently brought on Jeffrey Miller, the vice finance chairman for Trump's inaugural committee, as a lobbyist. Miller's team also includes others with close ties to the Trump Administration. All of those ties may be needed if the trade talks extend past the 2020 election.
With Apple's stock trading at an all-time high, right now isn't the best time to build a position. But any dip is a buying opportunity if the iPhone maker benefits from renewed growth in the new year.