Tim CookSource: Apple

What you need to know

  • Deutsche Bank analysts say Apple is unlikely to repeat last year's performance when it comes to stock price.
  • They expect the stock to "normalize at a higher valuation".
  • They also believe Apple will perform more strongly than current Wall Street estimations.

Deutsche Bank analysts believe that Apple is unlikely to repeat its 2019 performance in which its stock grew by 86% across the year.

As reported by Business Insider:

Apple will impress Wall Street in the new year, but don't expect the tech giant to jump as much as it did in 2019, Deutsche Bank analysts wrote in a Sunday note.

The iPhone maker surged 86% in 2019, notching its best annual return since 2009. Strong iPhone 11 sales and growth in its wearables business fueled the massive run-up, and while DB expects strength to continue through 2020, the analysts caution that the stock will "normalize at a higher valuation."

Analysts Jeriel Ong and Ross Seymore said that the current setup "bodes poorly" for investors with AAPL holdings, seemingly because whilst the stock is not expected to repeat last year's return, it is still expected to perform strongly, which means investors will have to choose between holding onto a stock that will not perform as well this year as it did last year, or between shifting to potentially faster moving, but higher risk investments.

They believe that Apple's fundamentals will perform more strongly than current Wall Street estimations, citing strong holiday performance across several lines, as well as the upcoming "supercycle" of the 5G iPhone.

They marked the stock with a "hold" rating, and the report notes that potential risks from "sharp valuation expansion" are now balanced with "potential reward."

"Overall, with uncertainties still existing in the 2020 iPhone growth trajectory, macro risks with tariffs still unsettled (China yet to be fully resolved), and a valuation that reflects a lot of goodness in our view, we are unsure whether the fundamental outperformance can outstrip the high investor expectations for the stock in 2020."

AAPL has continued its strong 2019 performance through the first week of 2020, where it's price has risen from $289 to $298. On January 2, it briefly tickled the $300 threshold. It will likely pass through this in the coming week or so if growth continues.