Shares of Apple Inc. surged to another record high Wednesday, and have now doubled over the past year, in the wake of the company’s report on its app store sales.
The technology behemoth
said Wednesday that App Store customers spent $1.42 billion between Christmas Eve to New Years Eve, a 16% increase from the same holiday-season period a year ago. On New Year’s Day, App Store customers spent a single-day record of $386 million, up 20% from last year.
Since the App Store’s launch in 2008, Apple said app developers have earned over $155 billion, with one-quarter of those earnings–roughly $39 billion–recorded in 2019.
Wedbush analyst Dan Ives said the numbers were “impressive,” especially when coupled with his belief that Apple finished 2019 selling 67 million AirPods, or well above his original estimate of 56 million. That speaks to “underlying strength that [Apple] is having monetizing its golden jewel installed base of 925 million iPhones worldwide heading into fiscal year 2020 and beyond,” Ives wrote in a midday note to clients.
The stock shot up 1.6% to a record close at $303.19. It has now run up 101.1% over the past 12 months.
There are only two other S&P 500 index components that have doubled in the past year: Advanced Micro Devices Inc.’s stock
has run up 130.5% and Lam Research Corp. shares
have climbed 119.1%. But those semiconductor companies are much smaller than Apple, which is the most valuable U.S. company with a market capitalization of $1.329 trillion; AMD’s market cap is $53.3 billion and Lam’s market cap is $43.5 billion.
In comparison, the Nasdaq Composite Index
has gained 32.4% in the past year and the S&P 500
has advanced 26.4%.
Apple has also outperformed the other “FAANG” stocks, which include Facebook Inc.
, Amazon.com Inc.
, Netflix Inc.
and Google-parent Alphabet Inc.
, by wide margins in the past year.
Since Apple’s stock closed at $150.75 on Jan. 8, 2019, when there were about 4.715 billion shares outstanding, Apple’s market cap has increased by about $618 billion, which by itself would be the fifth most valuable U.S. company. (Apple’s most recent quarterly filing disclosed shares outstanding of 4.443 billion shares as of Oct. 18.)
The stock’s rally comes as Apple indicated it was shifting its focus to its services business, which includes its App Store, and away from its iPhone business. During 2019, the services offerings Apple introduced include Apple Arcade, Apple TV+, Apple News+ and Apple Card, to go with other offerings, such as Apple Music and iCloud.
Wedbush’s Ives reiterated his outperform rating and his stock price target of $350. He said his “bull case valuation scenario” is at $400 a share, which implies a 32% gain from current levels.
“We continue to believe an upside on iPhone units, services, and AirPods will result in a strong December quarter for [Apple], on January 28th after the bell with clear momentum heading into a massive 5G super cycle with currently 350 million iPhone customers in the window of an upgrade opportunity,” Ives wrote.
Instinet’s Jeffrey Kvaal wasn’t as bullish after the App Store update, however, saying the data indicates that growth is “healthy, if slowing.” He said the data indicates App developer earnings growth has decelerated to 15% in 2019 from 27% the year before, below his expectations of about 20% growth.
Kvaal said the update suggests little upside to his forecasts for growth in Apple’s services business. Kvaal reiterated the neutral rating he’s had on Apple since December 2017, and kept his stock price target at $225, which is 26% below current levels.
“Our estimate of 15% App Store growth in 2019 is likely a conservative barometer for FY20 growth, as it reflects a slow year in China gaming as well as only trial subscriptions for Apple TV+,” Kvaal wrote in a research note. Nevertheless, the growth rates imply little scope for upside to our 18% estimate and may suggest deceleration towards the mid or even low teens in FY21.”