Apple Stock Forecast: What Will Happen to Apple Inc. (AAPL) in 2019?

Apple Inc
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AAPL Stock Forecast

In the past two-and-a-half years, Apple Inc. (NASDAQ:AAPL) stock has enjoyed a tremendous rally.

What’s particularly worth noting is that, back in the summer of 2016, Apple was already one of the biggest companies in the world by market capitalization. And yet, the stock went on to double in price, allowing Apple to become the first company to cross the $1.0-trillion mark in market cap.

Most recently, however, Apple stock hasn’t been a hot commodity. Shares have slipped more than 10% since reaching over $232.00 apiece on October 3. Of course, the market-wide sell-off later that month probably had something to do with the stock’s downfall.

But investors also didn’t seem to be impressed by Apple’s latest earnings report; the stock dropped 6.6% following the November 1 press release.

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How long will AAPL stock stay in the penalty box? And will the stock make a comeback in 2019?

Well, for investors searching for an Apple stock forecast, there are a few things that could get the stock back on its uptrend.

Potential Catalyst No. 1: Strong Holiday iPhone Sales

Like most technology behemoths, Apple seems to be working on a million different things right now. But smartphones remain its core business. In the September quarter, the company earned $37.2 billion from “iPhone” sales, representing 59.1% of its total revenue. (Source: “Apple Inc. Q4 2018 Unaudited Summary Data,” Apple Inc., last accessed November 8, 2018.)

The actual shipments, however, missed estimates. Wall Street expected Apple to sell 47.5 million units of iPhones in the September quarter, while the company reported less than 46.9 million units sold.

In fact, the miss on iPhone sales was one of the main reasons why AAPL stock took a tumble after the earnings report. The company actually beat Wall Street’s estimates in both revenue and earnings.

Going forward, strong iPhone sales in the holiday season could inject some bullishness to the stock.

But we won’t get the detailed iPhone sales figures from Apple. During the latest conference call, the company’s Chief Financial Officer Luca Maestri said: “Starting with the December quarter, we will no longer be providing unit sales data for iPhone, iPad and Mac.” (Source: “Apple (AAPL) Q4 2018 Results – Earnings Call Transcript,” Seeking Alpha, November 1, 2018.)

Therefore, investors will have to look at industry reports or management comments to get an idea of how many iPhones the company sells.

Potential Catalyst No. 2: Continued Growth in Services

Selling an iPhone is a one-time event. But that event can become the base for recurring business: services. With an active installed base of more than one billion devices in its ecosystem, Apple’s “Services” segment has been firing on all cylinders.

To be precise, Apple’s Services segment includes “Digital Content and Services,” “AppleCare,” “Apple Pay,” “Licensing,” and other services. In the September quarter, Apple’s Services revenue totaled almost $10.0 billion, representing a 17% increase year-over-year and marking a new all-time high for the company. (Source: Apple Inc., op cit.)

Looking forward, Apple has set a goal to double its fiscal 2016 services revenue by 2020.

Apple’s Services revenue has been growing at a double-digit clip for quite some time. If the company can stay on track to achieve its 2020 target for the segment, it would be good news for AAPL stock.

Potential Catalyst No. 3: Improving Financials

Apple stock fell after the company’s latest earnings report, but that did not mean earnings weren’t good. In fact, what I like most about the company is that, despite being one of the most established players in its business, Apple still grows like a startup.

In the September quarter, Apple generated $62.9 billion in revenue, marking a 20% increase year-over-year. Bottom-line results turned out to be even more impressive, with earnings coming in at $2.91 per share, up a staggering 41% from the year-ago period. (Source: “Apple Reports Fourth Quarter Results,” Apple Inc., November 1, 2018.)

These numbers didn’t cheer up investors though. That’s because of the missed iPhone shipments, the change in the company’s reporting methods for hardware device sales, and the stock market sell-off not that long ago.

But I should point out that, for a large-cap, blue-chip stock, a 20% growth in revenue and a 40%+ spike in earnings per share is extremely impressive. If Apple can keep delivering numbers like these, investors will likely notice eventually.

Potential Catalyst No. 4: Buybacks

This should be an obvious one.

Apple has hoarded a lot of cash over the years, and it is returning some of that cash back to investors through buybacks. In 2017, Apple spent $32.1 billion on share repurchases, more than any other S&P 500 company. (Source: “S&P 500 Q4 2017 Buybacks Rose 6.0% to $137.0 Billion; Full-Year 2017 Fell 3.2% to $519.4 Billion,” Cision, March 21, 2018.)

As the company keeps buying back its shares, it reduces the number of shares outstanding. Therefore, each existing shareholder gets to own a slightly larger portion of the company. Because of the lower share count, the action would also improve per-share metrics—such as earnings per share.

With Apple pursuing its massive $100.0-billion share repurchase program announced earlier this year, the potential of owning a larger slice of the Apple pie would look quite appealing to investors.

Don’t Forget Dividends

For those searching for an Apple stock forecast for 2019, the focus will likely be on the AAPL stock price. However, it’s worth noting that, other than through share price appreciation—which always comes with uncertainty—the iPhone maker provides a more surefire way for investors to earn a return.

And that’s through dividends.

I won’t go into too much detail here. Just note that Apple currently pays quarterly dividends of $0.73 per share, which comes out to an annual yield of 1.4%. And since the company reinstated its dividends in 2012, management has raised the per-share payout by 92.8%. (Source: “Dividend History,” Apple Inc., last accessed November 8, 2018.)

Remember, shareholders get to collect these dividends regardless of how the AAPL stock price is doing.

Apple Inc. Stock Chart

Chart courtesy of StockCharts.com

Analyst Take

I believe that Apple Inc. is on the right track, dominating the smartphone business while diversifying its revenue stream with its fast-growing Services segment.

However, investors should keep in mind that, as one of the most widely followed tickers in the U.S., AAPL stock could be affected by changes in overall market sentiment. That is, even if Apple delivers on all fronts, if the stock market crashes in 2019, the company’s share price could take a hit, too.