Apple Stock Forecast: AAPL Looking Ahead to the Calm After the ‘Storm’

The article was written by Whitney Su, a Financial Analyst at I Know First.
Source: Fortune

“…we are as excited as ever about our pipeline of innovative hardware, software and services,” We’re looking forward to sharing more with developers and customers at Apple’s 30th annual Worldwide Developers Conference in June.”

 Tim Cook, CEO, Apple, Inc.


  • Despite concerns over the ongoing Trump-Xi trade war, we can expect Apple to operate as usual in Greater China (Mainland China, Hong Kong, and Taiwan), which accounts for nearly 20 percent Apple’s total revenue.
  • Stock prices went up by more than 1% on 11 June 2019, closing at $194.99, after Foxconn’s statement that it was capable of relocating iPhone production outside of China, if necessary. Stock prices have seen an upward trend since that announcement.
  • I give AAPL stock a bullish one-year forecast. No longer relying on iPhone sales to hold up the company, Apple is turning towards services instead, projecting increased service sector revenue of $14 billion per quarter by 2020.
  • Widespread popularity of the Apple Watch and AirPods spearheads revenue increases in Apple’s “Other Products” sector. Innovative product development will continue to drive up AAPL stock prices.

Apple and Its Crucial Relationship with China

Source: TechinAsia

Starting 1 June 2019, China enacted a tariff policy as high as 25% on $60 billion worth of U.S. goods (over 5,000 American import products) in response to American tariffs issued earlier in May. Yet, many are more anxiously awaiting China’s response to the recent Huawei ban issued by President Trump, expressing fears that China will retaliate with a similar “Apple-ban”, which would bode ill, as the Greater China region (Mainland China, Taiwan, and Hong Kong) accounts for a significant portion of company revenue, accounting for 17.6% of the Apple’s total revenue for the second quarter of 2019.If an “Apple-ban” were to occur in China, AAPL stock would definitely dip drastically.

However, despite tensions running high with the ongoing US-China trade-war and the Trump administration announcing a ban on Huawei, China has yet to target Apple. Although there are fears that Apple is up next on China’s list of targeted American companies, the chances of that happening are quite slim according to analysts who have carefully studied the US-China trade disputes. “The Chinese have not targeted Apple at all, and, I don’t anticipate that happening, to be honest,” CEO Tim Cook told CBS News. The CEO of Huawei, Ren Zhengfei, also expresses similar views. When interviewed by Bloomberg about China potentially boycotting Apple in the near future as a retaliatory measure, Ren said he would be opposed to any such retaliatory action from Beijing even as tensions with the United States escalate.  “That will not happen first of all, and second of all if that happens, I’ll be the first to protest”.

Source: Reuters

Indeed, mirroring the belief behind the quotes expressed above by CEOs Tim Cook and Ren Zhengfei, it is highly unlikely that China will take retaliatory measures towards Apple. Let’s say, hypothetically, if China does ban Apple’s products and services, the US will surely ban US technology companies selling to China, which would greatly devastate high tech industries in China, since many Chinese companies rely on US hardware and software supplies. For example, if Google and Qualcomm stop licensing its Android system and communication core technologies to the smartphone manufacturers, that will essentially destroy the entire Chinese smartphone industry, companies such as Xiaomi, ZTE, Huawei, OPPO, and numerous other Chinese brands. Secondly, if Apple’s products are banned, that will give Apple added incentive to move its vast manufacturing (by FOXCONN) capabilities out of China to neighboring Vietnam, Taiwan, etc. As of May 2019, Apple supports about 5 million jobs in China, with 1.8 million of the jobs being through its iOS App Store ecosystem, according to the Apple homepage. Foxconn, the Taiwan-based subcontractor for Apple, provides another 1+ million jobs in China. If Apple were to be banned in China, the negative economic impact on China would be tremendous. We can count on the company’s continued operation in China.

Source: MacRumors

Some have expressed fears that even if Apple remains untouched by the Chinese government itself, the Chinese public will boycott its products in a show of nationalistic pride amidst the US-China trade war. Yet, Apple can rely on the brand’s status appeal when it comes to the purchasing habits of the Chinese public, especially young, white-collar adults in urban areas. In this rapidly developing country, “brand-name” items are commonly seen as signifying wealth and status, and are therefore highly sought after among the general public. Tim Cook says in the fiscal Q2 2019 conference call, “We believe strongly in our long-term opportunity in China, thanks to our robust ecosystem, our talented developer community, and the country’s growing population of tech-savvy consumers who value the very best products and services”.

iPhone Facing Fierce Competition

iPhones are the biggest component of Apple’s sales, accounting for 63% of Apple’s total revenue for 2018.  iPhone unit sales worldwide grew from 1.39 million in 2007 (iPhone initial release) and peaked in 2015, with 231.22 million units sold. Since then, iPhone sales have declined, selling 217.72 million units in 2018. Sales of iPhone in all five geographic regions experienced slowed growth compared to previous years. Not only did iPhone unit sales in China not increase, in fact, it went down by a noticeable 13 percent, whereas unit sales for Apple’s biggest competitor in China, Huawei, increased by 16 percent. Other domestic rivals like Oppo, Vivo and Xiaomi, all offer cheaper, high-end smartphones tailored for the Chinese consumer market.

Source: Canalys

iPhone sales in its “home territory” (United States) also did not fare well last year. The Americas region accounted for 42.2% of overall 2018 company revenue. There are now 193 million iPhones being used across the U.S. While that’s up from a little less than 180 million at the same period last year, it is worth noting that the figure’s growth is just 2% quarter over quarter and 12% year over year, according to 9to5Mac. In 2018, Apple’s growth rate stood at 4% quarter over quarter and 19% year over year, decreased rates from previous years. iPhone use in the US will “continue to plateau” according to CIRP (Consumer Intelligence Research Partners).  

Future Growth for Apple Lies in its Services

Services accounted for 14.0% of revenue for 2018. Apple’s leadership realizes that as the smartphone market becomes saturated after a decade of rapid growth, its new focus should instead be on its services. The services sector includes popular selections such as iTunes, the App Store, the Mac App Store, Apple Music, and Apple Pay.  The services sector’s increase in revenue contribution has been over 20 percent for the last two years in a row, with 2017 and 2018 seeing 23% and 24% increase in revenue year-to-year, respectively, making services the fastest growing sector of the company. The second fiscal quarter saw services bringing $11.5 billion in revenue, setting a new all-time record for quarterly services revenue. Apple’s 390 million paid subscriptions across all of its services is an increase of 30 million compared to last quarter. By 2020, over half a million paid subscriptions are expected.  A series of new services that would boost services revenue even higher in the near future was recently announced. Apple News+, a $9.99 per month service that provides unlimited access to more than 200 magazines, has already launched, and later this year, there are plans to introduce Apple Arcade, Apple News+, and even a new Apple Card credit card.  The company has said that it is aiming to reach $14 billion in services revenue per quarter by 2020, and the company is well on its way to reaching that goal. Two of the biggest service products propelling this anticipated growth target are Apple Music and Apple Pay.

Apple Music is creeping up in sales and subscribers to its main competitor, Swedish-company Spotify. Apple Music is expanding more rapidly in the US than Spotify, expanding at a rate of about 2.6 to 3 percent as opposed Spotify’s 1.5 to 2 percent. Furthermore, Apple Music now has more paid US subscribers than Spotify—specifically, more than 28 million versus Spotify’s 26 million as of data last collected in February 2019. This upward growth trend for Apple Music is projected to continue for the upcoming years, as there are many appealing factors to Apple Music. One of the biggest “plus” factors for Apple Music as opposed to Spotify is the Beats 1 feature, a 24/7 radio station that offers constantly updated new playlists and live DJs. Essentially an internet radio station, Apple keeps customers coming back by getting the biggest names, such as the former Radio 1 DJ Zane Lowe. To further engage their audience, Apple Music has an exclusive social feature called Connect, which is essentially a platform for artists to link up with fans in a more personal manner, creating a more tight-knit fan base with features such as access to new singles, videos, and messages.

Source: Bloomberg

Apple Pay is another Apple innovation spearheading revenue in the services sector. At Apple’s Keynote event earlier this year in March, Tim Cook, CEO, proclaimed “This is huge!” when he announced Apple announced an estimate of 10 billion Apple Pay payments in 2019, which Apple is on target to reach, with 1.8 billion transactions in the first quarter of 2019, which was twice the transactions as during Q1 2018, a sign of just how rapidly Apple Pay is expanding. Apple Pay will account for half of mobile wallet users by 2020 according to Apple iTunes chief Eddy Cue.

Apple Pay has more than doubled year-over-year, well on its way to reach the target of 10 billion transactions for 2019. Apple Pay is now available in 30 markets worldwide and is projected to be live in 40 markets globally by the end of 2019. This past year, major world urban centers such as London, Tokyo, and Shanghai adopted use of its contact less entry, and Apple is hoping this will spur the growth of more Apple Pay users in the United States. More and more transit systems around the world are accepting Apple Pay. New York’s MTA system, with its over 5 million rides per day, will begin Apple Pay rollout in early summer 2019, greatly increasing Apple Pay use in the American market.

Innovating Wearable Products Dominate the Market

This April, Apple introduced the newest AirPods. The second generation of the world’s most popular wireless headphones has seen incredible demand, with Apple focusing on keeping up with such high consumer demand. They have become a cultural phenomenon. With the new Apple-designed H1 chip, the new AirPods deliver faster connect times, more talk time, and the convenience of hands-free Hey Siri, Airpods are unmatched in the wireless headphone market.

Source: slice intelligence

Another product fueling the record-breaking quarterly revenue of $5.1 billion in the Wearables Home and Accessories category is the Apple Watch. Apple Watch is the best-selling and most loved smartwatch in the world right now, having produced its best results ever for a non-holiday quarter. It’s reaching many new customers, with three quarters of purchases going to customers who have never owned an Apple Watch before.

Source: Counterpoint Technology Market Research


Apple has received quite a bit of negative press as of late, being hit with a wide variety of concerns from investors ranging from that of the US-China trade-war to lackluster iPhone sales performance reports. Yet, looking to the long-term, the outlook is bullish. It is highly unlikely that the Chinese government will target Apple, as doing so would hurt Chinese tech companies in additional to the millions of Chinese workers that work in Apple’s factories in China. Even if the company were to be affected by government policies, production capacity can be fully relocated outside of China, as Foxconn announced 11 June 2019. As for iPhone woes, Apple’s leadership has anticipated this and is focused on developing its services sector to cater to its consumer base. In addition to its most famous products (iPhone, Mac, iPad), Apple is also a key player in the Wearables industry, with sales of its AirPods and Apple Watch dominating their respective fields.

AAPL ended Q2 of 2019 with $225 billion in cash, plus marketable securities. Apple had $101 billion in term debt and $12 billion in commercial paper outstanding, for a net cash position of almost $113 billion. Therefore, we see that Apple is in a very strong position that allows for the company to confidently invest in all sectors of the business, while continuing to return value to shareholders. Apple’s optimism about future growth is seen in its announcement about the commitment to contribute more than $350 billion to the U.S. economy over the next five years, including the creation of 20,000 American jobs. This is in good agreement with the long-term bullish I Know First forecast.

Current Bullish I Know First Forecast for Apple

The I Know First machine learning algorithm currently has a positive outlook for AAPL. The stock is bullish over the 1 month, 3 months and a year horizon. It is most bullish for the 1-year period with a signal of 211.45 and predictability indicator of 0.71.

How to interpret this diagram.

Past I Know First Success with Apple

On 11 March 2019, I Know First published a bullish forecast for AAPL. Since then, the stock price has gone up by over 8.5% to 195.85 as of 13 June 2019, showing another success of I Know First algorithm in forecasting stock movement.

This bullish stock forecast was sent to the current I Know First subscribers on 11 March 2019.

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Please note-for trading decisions use the most recent forecast.