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Buy Apple (AAPL) Stock Up 22% in 2019 Before Streaming Video Launch?

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Shares of Apple (AAPL - Free Report) climbed over 3.4% in morning trading Thursday as buzz builds regarding the highly anticipated unveiling of its new streaming video service that hopes to challenge Amazon Prime (AMZN - Free Report) , Netflix (NFLX - Free Report) , and Disney (DIS - Free Report) . The climb is part of a larger 2019 comeback, which begs the question is now the time to buy Apple stock?

Streaming Video Event?

Apple is expected to reveal details about its new streaming video service at its Cupertino, California headquarters on Monday, March 25. The event invitation tagline is “It’s show time” and features an old-school movie countdown. Therefore, it seems all to clear that CEO Tim Cook and Apple plan to debut its long-awaited streaming service as the company faces slowing iPhone sales.

Details of Apple’s new streaming video service are mostly speculative at this point, including where the platform will be available, what it will cost, and what content it will feature. Multiple reports suggest that Apple plans to release the streaming video service for free on most of its devices. Meanwhile, the technology powerhouse has reportedly spent over $1 billion on shows, which include an M. Night Shyamalan thriller series, a comedy from the Always Sunny in Philadelphia creators, and much more.

Investors should note that Apple is expected to introduce its new subscription news services on Monday as well.

Other News

Apple earlier this week also showed off updated versions of its secondary hardware products, including a new iPad, iMac, and AirPods. The new iMac features faster Intel INTC chips and AMD (AMD - Free Report) GPUs, while the AirPods boast “50% More Talk Time” and more.

Meanwhile, Needham analysts upgraded AAPL stock from a “buy” to a “strong buy” and raised their price target from $180 to $225 per share, citing stronger-than-projected results from Services and Wearables, and more. The new price marked 20% upside from Apple’s closing price of $188.16 per share Wednesday.

Better yet, the updated target still rests below Apple’s 52-week high of $233.47 per share. Apple stock popped 3.4% through morning trading Thursday to hit $194.53 a share.

 

 

Outlook

Along with, Needham’s positivity, Morgan Stanley (MS - Free Report) remains bullish, as do some other heavyweights. Much of the upbeat sentiment on Wall Street surrounding the iPhone firm focuses on its ability to make more money from its massive user base. Apple closed last quarter with 1.4 billion active devices, which includes iPhones, Macs, iPads, Apple TVs, iPods, and Apple Watches. More specially, the company boasted that its iPhone installed base reached 900 million.

Clearly, Apple’s streaming video offering has been hyped. But it is unclear how well it will perform in a market that already features Netflix, Amazon, Hulu, and soon enough Disney, AT&T (T - Free Report) , not to mention Facebook (FB - Free Report) and YouTube (GOOGL - Free Report) . Luckily for investors, Apple and Goldman Sachs GS are reportedly set to offer a credit card that pairs with an iPhone app, which is part of Apple’s larger financial tech ambitions as fintech powers Square (SQ - Free Report) , PayPal (PYPL - Free Report) shake up the credit card and banking industry. Furthermore, Apple and Cook see Apple Watch-style health offerings playing a valuable role for the company.

 

 

Moving on, our current Zacks Consensus Estimate calls for Apple’s current-quarter revenue to sink 5.8% to hit $57.60 billion, which would come in below last quarter’s 4.5% top-line decline. On top of that, quarterly iPhone revenue is projected to tumble roughly 20% to $30.57 billion, based on our current NFM estimate. With that said, the Services unit looks to be one of the lone bright spots, with sales projected to jump over 22% to $11.29 billion.

Jumping further ahead, Apple’s full-year 2019 revenue is expected to dip 4.2%. The company’s fiscal 2020 revenue is projected to pop 3.1% above our 2019 estimate, which would still come in below 2018’s $265.60 billion.

At the bottom end of the income statement, Apple’s adjusted Q2 earnings are projected to fall 12.8%. Meanwhile, AAPL’s full-year 2019 EPS figure is expected to dip by 4.4%. The company’s adjusted 2020 earnings are projected to climb over 12% above our 2019 estimate.

Bottom Line

Apple is currently a Zacks Rank #3 (Hold) and its full-year 2019 outlook appears rough. Nonetheless, Apple sits on a massive pile of cash and pays a dividend. Plus, AAPL stock is trading at 15.5X forward 12-month Zacks Consensus EPS estimates. This marks a discount compared to the S&P 500’s 16.7X and peers such as Microsoft (MSFT - Free Report) , which is trading at 24.6X.

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