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Here's why Apple stock has surged more than 100%

Brian Sozzi

Wall Street’s growing view on Apple’s stock right now: forget the earnings release due out Tuesday evening, think more about the earnings releases out later this year and 2021.

Because by then, Apple (AAPL) may be amidst a 5G iPhone upgrade supercycle.

“We believe part, if not most, of Apple’s recent positive stock movement relates to high expectations for iPhone 12/5G shipments at the end of this year,” wrote Goldman Sachs analyst Rod Hall in a new note to clients today. Apple’s stock has surged more than 100% over the past year, dusting the Dow Jones Industrial Average’s 24% gain.

A 5G iPhone upgrade cycle could have a profoundly positive impact on Apple’s bottom line, hence Mr. Market is pricing it into the tech beast’s stock currently.

Amidst the consumer rush to capture the higher download speeds associated with 5G network rollouts from Verizon (Yahoo Finance’s parent company), AT&T and T-Mobile, Apple would in effect be selling mostly premium-priced phones. Most iPhone users are unlikely to care about the price of the faster new iPhone 5G, they will just want it because it offers an instant real world benefit.

Sound the cash register alarm, Apple.

Hall isn’t alone in his assessment of the real driver behind Apple’s amazing year-long stock run.

Wedbush analyst Dan Ives notes there are presently 925 million iPhone users worldwide, and roughly 350 million fall into the “window of an upgrade opportunity.” Ives anticipates there will be at least five new iPhone releases in 2020 with the “main event” being the 5G launch in September, which could include “a number” of different models.

Ives doesn’t expect final specs on the 5G iPhone will be shared until April.

Customers look at new Apple iPhones including the iPhone XS, left, iPhone XS Max on display at an Apple store in New York on Friday, Sept. 21, 2018. (AP Photo/Patrick Sison)

“While the stock has had a massive rally over the past year and thus far in 2020, we continue to believe this is a ‘must own’ stock into what we would characterize as a transformational 5G supercycle over the next 12 to 18 months with Apple being our favorite 5G play,” Ives says.

Despite the growing hype around an iPhone supercycle, average investors would be wise to carefully comb through Apple’s latest earnings report. The impressive run in Apple’s stock has also been fueled by high expectations around Airpods demand and subscription growth for Apple TV. Couple that wil speculation that Apple will soon debut a cheaper iPhone, expectations are elevated.

If Apple fails to deliver in any form, the stock will probably tank.

“It [Apple] is vulnerable… if we get good numbers… the stock should still be fine. If there are negative ones… all you really need is buyers to step back… and the thing could definitely see a lot more weakness,” Miller Tabak strategist Matt Maley said on Yahoo Finance’s The First Trade.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Watch The First Trade each day here at 9:00 a.m. ET. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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