Apple in 2020: What Will It Look Like?
It’s so easy to find forecasts about Apple Inc. (NASDAQ:AAPL). Almost too easy. Just type “Apple stock predictions 2020” into Google and see what comes up. People throw out all sorts of numbers, but there’s only one number to describe Apple in 2020: $1.0 trillion.
No, you didn’t misread that.
I truly believe that Apple’s valuation could surpass $1.0 trillion. The share price only needs to climb 35% to make that happen, which is nothing for an earnings beast like Apple.
Heck, AAPL stock jumped 29.8% in the last 12 months. And that was considered a down year!
Once you think about it, the idea seems more and more obvious. Apple’s target market segment is still unfulfilled in places like China, meaning there is a lot of money still on the table.
Besides, we’re talking about a company that churns out $45.7 billion in annual profit.
Except for one or two quarters, “Apple iPhone” sales continue to shatter all known records, largely because of growth in China. There were one or two down quarters (caused by a Chinese stock market crash), but the long-term trend is stable.
Apple is a growth machine.
But more to the point, Apple stock is trading cheap.
What do I mean? Simple: the hottest tech stocks trade at several hundred times earnings, but AAPL stock currently trades at 17. See for yourself:
THE REAL COST OF TECH STOCKS
As you can see, investors are undervaluing AAPL stock.
They’ve let certain analysts (I’m not going to name names!) get inside their heads. These folks believe that Apple iPhone sales have hit a ceiling, but it’s simply not true.
Apple sold 78.29 million iPhones in the first quarter of 2017, up five percent from the same quarter a year before. That is an inconvenient fact that AAPL stock bears will have to reconcile with.
Also, try not to be fooled by share prices.
I know that seeing a higher stock price can be disturbing, but it doesn’t tell you much about the stock itself. You have no idea whether it’s a good value for money.
Try, instead, to look at the price-to-earnings. It’s much more useful.
It reveals the real cost of the stock.
Because when you buy high P/E stocks (like Amazon, Netflix, and Salesforce.com), you’re paying a premium (high P/E = high expectations).
If the company’s revenues don’t soar eventually, the share price could crash and burn.
I’m not saying this will happen to Amazon, Salesforce, or Netflix; all three companies are leaders in fast-growing companies. Their potential is solid.
What I’m saying is that the market can be wrong, so try to think about that situation in reverse.
Look at the flip side. Apple is still growing, it’s got a ton of cash, and it’s dabbling in new technologies. Yet, for some reason, it has a rock-bottom P/E.
Some analysts look at this and say, Oh, that must mean Apple stock is out of growth. Okay, I guess we should try CRM stock instead. The market seems to like that.
Translation: This stock can’t be good because it’s cheap. And that stock must be good because it’s expensive.
A lot of investors and analysts fall into this trap. The temptation to follow the crowd is overpowering because it gives us a feeling of safety. I get it. It’s just human nature.
But it’s also the wrong way to think about investing.
We’ve all heard the expression, “Buy low, sell high,” so why don’t we apply it to our lives?
AAPL stock is trading at rock-bottom prices! Yet investors opt for high P/E stocks that are super-expensive. It doesn’t make sense to buy stocks at the top, yet that’s exactly what so many investors do.
Apple Target Market Segment Expansion
As it currently exists, Apple stock is already headed to $1.0 trillion. The main driver is iPhone sales, which, as you can see from the chart below, are on a steady upwards trend.
This chart is based on quarterly sales, so you’ll notice a cyclical climb up and to the right. With one or two exceptions, every quarter is better than the identical one from a year before.
Based on this trajectory, it’s almost boring to admit that Apple will become the first $1.0 trillion company on the planet. So here’s a little more food for thought.
What could propel AAPL stock thereafter? It’s hard to know what Apple in 2020 will look like, but my guess is that emerging technologies will play a big part of the company’s future.
The Cupertino-based company is expanding into new technologies, some of which could become as popular as the “iPhone” or “iPad.” These technologies could significantly boost our Apple stock predictions for 2020, since Apple has all the engineering talent needed to make them reality.
You may recognize some of the technologies; others will feel unfamiliar and exotic. But I assure you, all of them are promising new ventures for Apple. Here’s a quick list:
- Apple iCar
- Apple AI
- Apple Watch
If none of these ring a bell, don’t worry.
We have brief descriptions below; plus analyses of how they can benefit Apple stock.
Apple’s driverless car program was the worst-kept secret in Silicon Valley. The company stayed silent for two years as rumors swirled about an “Apple iCar.” But “Project Titan,” as it’s known within the company, is finally out in the open.
There was a letter sent to the U.S. highways regulator. It said: “The company is investing heavily in the study of machine learning and automation, and is excited about the potential of automated systems in many areas, including transportation.” (Source: “Apple Comments on Federal Automated Vehicles Policy,” Regulations.gov, November 22, 2016.)
Translation: We’re working on driverless cars.
Considering that driverless cars will become a $42.0-billion business, this opportunity should be factored into Apple stock. Investors should be asking themselves how much they would pay for AAPL stock if the Apple iCar is successful.
Yes, I am fully aware that Google, Tesla, Ford, GM, Uber, and a bunch of other companies are racing to establish a lead in this market. But Apple could emerge as a dark horse if it applies the same attention to detail that made the iPhone a shade better than the competition.
Lord knows that Apple has the money to make it happen! There’s very little that you can’t accomplish with $246.1 billion. That’s how much cash Apple has in the bank.
By saying Apple AI, I’m referring to “artificial intelligence.”
The term artificial intelligence is completely misunderstood by most people. It doesn’t refer to the robots from Ex Machina. It’s just a word to describe machines that can learn.
If a machine can spot patterns, retrain itself, and get better at its job, then it is artificially intelligent. It is what I like to call a “Thinking Machine.”
Apple already has some version of this. What do you think “Siri” is?
A software that can hear your questions and respond, but more importantly, one that gets smarter over time. That is an early form of artificial intelligence.
Like driverless cars, AI is one of the hottest areas in tech. I write about technology companies for a living, and even I can’t keep up with all the firms investing in AI! It’s exhausting.
Barely a day goes by between press releases that foretell new wonders of AI. However, Apple is one of the few companies that doesn’t shout its AI developments from the rooftops.
It is quietly integrating Apple AI into several of its products, making them smarter and more efficient. I’m confident that Tim Cook will find plenty of uses for Apple AI, which suggests to me that Apple will maintain its competitiveness.
We all know that the “Apple Watch” hasn’t lived up to expectations. It hasn’t replaced the iPhone as a core driver of revenue—but give it some time.
I still have hope for the Apple Watch. My optimism is actually tied to Apple AI, in the sense that AI improves voice-recognition software. Imagine being able to talk to your computer instead of typing on a screen.
Need to look up movie timings? Just ask your Apple Watch. That’s the kind of future that I believe is right around the corner, and Apple is uniquely positioned to make it happen.
Think about it: there are hundreds of millions, if not billions, of Apple devices across the planet. Once Siri is smart enough to handle everything we do on a computer, Apple could simply plug that software into the Apple Watch.
I imagine that would raise demand for the least-loved of Apple devices. It’s not a guarantee, but there’s a reasonable chance that AAPL stock could catch a tailwind from the Apple Watch. It could be the core driver of Apple in 2020.
Apple Stock Predictions 2020
It’s important to remember that “Apple stock predictions 2020” don’t hinge on these technologies. Apple doesn’t really need these technologies to cross $1.0 trillion in market cap. None of them have to be as big as the iPhone.
But it would be cool if they did. Apple stock could leave $1.0 trillion in the rearview mirror if one of these technologies catches fire. But it doesn’t have to happen. Apple still has one of the best long-term charts of all time.
Chart courtesy of StockCharts.com
As it stands, Apple just needs to sell more iPhones in order to satisfy the market. So long as sales records are shattered, I’ll sleep easy knowing that Apple stock is headed skyward.