Investors dumped Apple (NASDAQ:AAPL) stock in the first quarter at the height of the coronavirus pandemic. The company slashed its financial outlook. The coronavirus outbreak hit Apple’s product supply and demand amid factory shutdowns in China and retail store closings around the world. At one point in March, the stock fell by nearly 30% for the year. Investors sought cover from businesses taking a beating amid the virus outbreak.
However, investors have been flocking back to Apple. The stock reached a record high of about $355 on June 10.
Here are three reasons for investors to be bullish on Apple.
Apple stock could rise 16% from the current level
Investors have flocked back to Apple stock following its strong March quarter earnings and easing coronavirus restrictions. The company delivered revenue of $58.3 billion, which edged up slightly and beat the consensus estimate at $54.6 billion. Apple posted an EPS of $2.55, which rose by 40% from a year ago and beat the consensus estimate at $2.26.
Notably, Apple beat consensus expectations despite the coronavirus headwind. Investors liked the results. Apple stock has risen 15% since the earnings report on April 30.
At about $336 per share currently, Apple has pulled up 60% from its pandemic lows and spots a 15% gain year-to-date. According to Bank of America’s $390 target price, the highest on Wall Street currently, Apple shares could rise 16% from the current level.
5G iPhone could boost sales
Apple derives most of its revenue from iPhone sales. The stock tends to track the iPhone business.
Despite the coronavirus disruption, the company remains focused on its annual iPhone refresh tradition. The company’s 2020 flagship iPhone models are about to enter mass production for a possible debut in October. Apple has prepared four flagship iPhone models for 2020, all of which will come with 5G capability. The 5G phones will see Apple catch up with Samsung and Huawei in the 5G handsets market. The 5G phone should provide a major boost to Apple’s smartphone sales.
In April, Apple launched a new iPhone SE, which is a budget handset that looks perfectly priced and timed for the pandemic-hit global economy. The iPhone SE could also boost Apple’s smartphone sales in 2020. Notably, Apple stock has risen nearly 20% since the iPhone SE debuted.
Apple’s services business continues to roar
Apple has been shifting from its long reliance on iPhone and hardware sales in general. The company has doubled down on services to diversify its revenue sources away from hardware. The company is on course to hit an annual revenue milestone in its services division.
Apple continues to seek new ways to drive more growth in its services division. Apple Card is at the center of the services business drive. The card is a physical and virtual card tied to Apple Pay mobile payment services. The company plans to fuel the card’s uptake by expanding its installment payment option. Also, Apple teamed up with Walgreens on a cashback program. The program could draw more people to Apple Card and Apple Pay.
Notably, the success of the services business bodes well for Apple stock. The business could expand the company’s revenue and profits. The program could bring more stability to dividends and continue the share repurchase program.