A $2-trillion Apple Inc. (NASDAQ:AAPL) stock valuation is not out of the question if it reaches this goal
In one week, Apple (NASDAQ:AAPL) will announce its first-quarter results. Up more than 100% over the past year, Apple stock continues to be a godsend for Warren Buffett and Main Street investors alike.
I don’t know what you’ll be looking for when Tim Cook discusses Q1 2020, but I’ll be trying to understand how its Services segment is affecting the top and bottom lines. With 5G phones coming, I’m confident iPhones will make a substantial contribution to Apple’s financials in 2020.
However, it’s the company’s Services revenues that will move the Apple stock price higher over the long term. In the fourth quarter of 2019, the number of paid subscriptions from services offered on the Apple platform hit 450 million. CFO Luca Maestri expects that to hit 500 million this year.
As Apple builds a services juggernaut, I believe a $2-trillion valuation within two to three years is entirely possible. Here’s why.
Confessions of an Apple Paid Subscriber
I helped Apple hit 450 million paid subscriptions at the end of Q4 2019. I played a small part in that success by paying for my monthly Apple News+ and Netflix (NASDAQ:NFLX) subscriptions. I’m sure there are plenty of iPhone users out there with monthly bills for hundreds of dollars. By this metric, I’m a small change.
I’m a tiny piece of an enormous pie. Apple would prefer if 75% of the 217 million iPhones sold in 2018 utilized one paid subscription such as Apple News+ rather than 25% using a couple of paid subscriptions. Ultimately, it’s in the company’s best interest to make a little from a lot of people.
In October, CNBC published an article that discussed the idea of Apple selling iPhones on a subscription basis so that the company’s revenues would be more recurring and not so transactional.
It makes sense.
The more consumers are tied into Apple’s ecosystem, the better. Of course, the wireless carriers wouldn’t like it because they’d lose a good chunk of business from people who don’t buy their iPhones direct. However, if you haven’t noticed, the world’s biggest brands are selling a lot more products directly to consumers, eliminating the middleman.
In February 2019, Goldman Sachs (NYSE:GS) estimated that Apple received $9.5 billion in Services revenue in calendar 2018 from Google for traffic acquisition costs. To protect against an overreliance on this stream, Goldman and many others recommended Apple create a Prime membership bundle like Amazon (NASDAQ:AMZN) to ensure its services revenues continue to grow.
Tim Cook discussed the idea of bundling hardware purchases with its catalog of services during his Q4 2019 conference call. “In terms of hardware as a service or as a bundle, if you will, there are customers today that essentially view the hardware like that because they’re on upgrade plans and so forth,” Cook said. “So to some degree that exists today.”
They do this with cars, which are a heck of a lot more expensive, so why wouldn’t Apple do this with phones? The answer is, they will. Soon.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 288.48.
The projected upper bound is: 327.66.
The projected lower bound is: 310.08.
The projected closing price is: 318.87.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 31 white candles and 19 black candles for a net of 12 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 83.6772. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 4 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 75.44. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 37 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 91. This is not a topping or bottoming area. The last signal was a sell 1 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 25 period(s) ago.
Rex Takasugi – TD Profile
APPLE INC closed up 1.130 at 317.700. Volume was 7% below average (neutral) and Bollinger Bands were 65% wider than normal.
Open High Low Close Volume___
318.580 319.990 317.310 317.700 25,458,116
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 313.24 281.97 227.43
Volatility: 22 20 29
Volume: 32,741,612 27,540,058 27,400,318
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
APPLE INC is currently 39.7% above its 200-period moving average and is in an upward trend. Volatility is Our volume indicators reflect moderate flows of volume into AAPL.O (mildly bullish). Our trend forecasting oscillators are currently bullish on AAPL.O and have had this outlook for the last 106 periods. Our momentum oscillator is currently indicating that AAPL.O is currently in an overbought condition.
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