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Buy Apple (AAPL) Stock After FAANG Rally?

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Apple (AAPL - Free Report) saw its stock price surge over 7% the day after Christmas as part of a larger market rally that saw fellow FAANG stocks—Facebook (FB - Free Report) , Amazon (AMZN - Free Report) , Netflix (NFLX - Free Report) , Alphabet (GOOGL - Free Report) —and other giants like Microsoft (MSFT - Free Report) and Nike (NKE - Free Report) all soar. So, should investors think about buying Apple stock as we close in on 2019?

Wednesday’s Rally

Apple and many other stocks were the beneficiaries of the largest-ever post-Christmas rally for U.S. stocks. The Dow closed trading up 4.98%, or 1,086.25 points higher at 22,878.45. Wednesday's surge marked the biggest upward percentage climb since March of 2009 for the 30-stock index. Meanwhile, the S&P 500 jumped 4.96% and the Nasdaq Composite popped 5.84%—both of which also marked their best one-day moves, on a percentage basis, since March 2009.

Citron Research and Andrew Left’s new bullish outlook on Facebook helped FB stock surge. Likewise, AMZN stock jumped after Amazon boasted that its customers made more purchases worldwide than ever before during the holiday season (also read: Amazon Posts Record-Breaking Holiday Sales: Time to Buy AMZN Stock? and Citron Turns Bullish: Buy Facebook Stock in 2019?).

Shares of Apple jumped 7.04% to reach $157.17 a share. Despite Wednesday’s climb, Apple stock still rests roughly 32% below its 52-week high, which could present a potentially strong buying opportunity for those high on Apple.

Overview

Apple stock began to tumble after the company announced that it would no longer report iPhone unit sales, among other products. This seemed to confirm a long-standing worry that Apple’s days of massive growth in its most important segment are over—at least for now.

Investors also recently reacted negatively to a Chinese court’s ruling that called for a sales ban on some older iPhone models in the world’s second-largest economy. It is, however, unclear if and when this ban will actually be put into action. On top of that, Apple’s high prices have prevented its iPhones from gaining much traction in potentially key and massive markets such as India.

Outlook

Last quarter, Apple’s iPhone revenues jumped 29% to help total company revenues climb 20%. However, iPhone unit sales came in flat from the year-ago period. Therefore, Apple’s overall growth came mostly from its new higher-priced iPhones. But going forward the company will be report growth against periods that were already positively impacted by the pricing of the iPhone X and newer devices.

Looking ahead, our current Zacks Consensus Estimate calls for Apple’s quarterly revenues to pop just 3.4% to reach $ 91.26 billion. The company’s fiscal 2019 revenues are expected to jump 4.4% to hit $277.17 billion. Peaking ahead to the following fiscal year, Apple’s revenues are expected to climb 3.9% above our current year estimate to hit $287.95 billion.

Clearly, this is slower growth than Apple has experienced in the recent past. But investors might be pleased to see that Apple’s adjusted quarterly earnings are projected to surge nearly 20%. Meanwhile, the iPhone giants full-year EPS figure is expected to pop 10.7%. Plus, Apple’s earnings are projected to come in 11.50% above our current-year estimate in the next fiscal year.

Bottom Line

Apple’s own success has made it harder for the company to report large, year over year revenue gains on a percentage basis. Yet, Apple looks poised to become more profitable as it fights to expand into new growth areas. The company’s services business, which features Apple Music, will continue to be watched closely by investors as the division fights Spotify (SPOT - Free Report) and others.

Maybe more importantly, Apple is projected to launch a streaming TV service as soon as 2019 in order to challenge Netflix, Amazon, Disney (DIS - Free Report) , and AT&T (T - Free Report) in what could be a nearly completely streaming entertainment age. On top of that, Apple could surprise Wall Street by diving into other sectors, or introducing a new, gaming-changing product—like it has in the past.

In the end, it is up to investors to decide what to do with Apple. But AAPL stock rests well below its recent highs. Plus, Apple is currently trading at 11.1X forward 12-month Zacks Consensus EPS estimates. This marked a nearly one-year low and a discount compared to its year-long high of 19.7X.

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