Apple was the best action at Dow this year. Will it repeat in 2020?

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(CNN Business) - Apple's chief executive, Tim Cook, surprised investors on January 2, warning that iPhone sales in China would slow down. Apple shares fell 10% the next day, dragging the entire market along with them. But all have been good news for the company since then.

Apple shares reached their lowest point of the year, US $ 142, on January 3. The stock is now trading at around US $ 270.

Apple rose approximately 70% in 2019, which makes it the best performing Dow component by a fairly wide margin. Apple's rival, Microsoft, with a 50% gain, ranks second. (Both companies are now worth more than US $ 1 billion).

Although iPhone sales have slowed lately, there is growing excitement about the possibility of new models reviving growth.

In recent weeks, reports have been received on an iPhone 5G planned for 2020. Analysts have also been discussing the possibility that the premium versions of the new iPhones will no longer have a lightning cable and charging port by 2021.

But even if the iPhone 12 (assuming Apple calls it) does not lead to a major update cycle, Wall Street is excited about the fact that the company has been able to make existing users pay for more subscription services, such as Apple Music, iCloud, App Store, Apple TV + and Apple Pay.

Service revenues grew 18% in Apple's last quarter, although product sales fell slightly. Service revenues now represent just under 20% of Apple's total sales.

• IPhone sales decrease

Of course, it would be nice if Apple started selling more devices again. But some analysts still think that the company can continue to function well even if that does not happen.

"Apple will continue to focus its efforts on services and the growth of the installed base," Citi analyst Jim Suva said in a recent report. "Simply put, investors' expectations for the growth of the iPhone segment are not high." Last week, Suva raised its target price to US $ 300 per share, almost 15% above current levels.

The trade war may not affect Apple

Still, what about the commercial tension between the United States and China?

After all, Apple's stock plummeted in early 2019 due to concerns about the increased competition from Chinese smartphone rivals such as Oppo, Vivo and Xiaomi. The fear of more tariffs has further softened Apple's outlook in China.

But Tom Forte, an analyst at DA Davidson, who also has a target price of $ 300 at Apple, is not worried. Forte points out that Apple is such an important company for Chinese component manufacturers that it has a lot of influence on business conversations.

“Apple has done an incredible job, to date, minimizing the impact of tariffs on its business, which we believe is due to the fact, among others, that it is the only company with the power to effectively pressure US governments .UU. and China because of its influence in both countries, ”Forte said in a report last week.

Not everyone is convinced that Apple's best days are ahead. In fact, the action is polarizing for Wall Street analysts.

While 26 analysts currently have Apple shares rated as a purchase, according to Refinitiv, another 13 recommend waiting, while four analysts ask investors to sell it.

The agreed price target of Wall Street for Apple is US $ 261, 2% lower than current levels, although analysts predict that Apple's earnings will grow 10% in 2020 and will continue to rise at a 10% cut, in average, over the next five years.

Do more iPhone users switch to Android?

Maxim Group analyst Nehal Chokshi, one of the biggest drivers of Apple's stock sale, is not convinced that Apple will continue to generate more revenue from services. His fear? Consumers may be leaving iPhone to buy Android phones.

Nine percent of iPhone users surveyed this year by Maxim Group said they plan to switch from iPhones to another mobile device. That is a 5% increase in a similar survey in 2017.

It may not seem like much, but Chokshi said that it is enough to deflate the argument of those who drive the combination that “an iPhone user will remain an iPhone user in the foreseeable future and, therefore, the growing portfolio of services ... generates a growing annuity. "

Chokshi has a sales rating and a target price of $ 190 for Apple stock. That is one of the lowest on Wall Street.

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