Apple Was the Dow’s Best Stock in 2019. What Could Happen Next. - Barron's

Photograph by Alastair Pike/AFP via Getty Images

We’re taking a look at all 30 stocks in the Dow, starting with the worst performer in 2019— Walgreens Boots Alliance —and working our way up to the highest-flying stock in the benchmark—Apple.

If Barron’s gave out a Stock of the Year award, we’d have to hand it directly to Apple.

It’s not even a contest. Apple (ticker:  AAPL) shares soared 86% in 2019, working steadily higher and higher into new record territory, and driving its market cap to an astonishing $1.3 trillion, eclipsed only by newly public Saudi Aramco.

Talk about climbing a wall of worry: Apple’s remarkable year came despite formidable product and macro challenges. Sales of the company’s flagship iPhone sagged, in the face of market share loss in China and anticipation of the first 5G phones in late 2020. The company launched Apple TV Plus, its new streaming video service, to mixed reviews. And trade tensions with China were a dark cloud over the company throughout 2019.

But investors largely ignored those issues. Apple CEO Tim Cook deftly bobbed-and-weaved his way through contentious trade and tariff issues, building an unlikely but invaluable relationship with President Trump. The company’s wearable business is red hot, driven in particular by widespread adoration for AirPods, which sold out online in the recent holiday shopping season. The iPhone 11 has driven more demand than many observers had anticipated, aided by a specific focus on improving the image quality from the phones’ cameras. And investors are all atingle over both Apple’s big push into services, including credit cards and cloud-based mobile gaming, and the arrival of 5G phones.

Whatever the reason, there is no denying the results. Apple shares rallied more than $130 a share in 2019, adding a whopping 885 points to the Dow Jones Industrial Average, or about 17% of the overall 5,200-point gain for the blue chip indicator in 2019. Apple increased its market cap by an astonishing $574 billion in 2019, about equal to the total market valuation for Facebook. Apple’s market cap appreciation in 2019 was larger than the combined market caps of all 159 companies that went public in the U.S. in 2019, a list which included Uber, Lyft, Pinterest, Peloton and Beyond Meat, among many others. (Those companies are together worth a little under $400 billion, according to the IPO research firm Renaissance Capital.)

Investors have to be wondering what Apple can do for an encore.

No question, there will be pressure on Apple to actually deliver on the high expectations for 5G iPhones—and investors will want to see progress as well on Apple TV Plus and other services. It should be a huge year for AirPods. Bernstein analyst Toni Sacconaghi recently asserted that Street forecasts are likely underestimating AirPod sales for 2020 by between $4 billion and $8 billion. Meanwhile, the spectacular rally has lifted the company’s stock price well beyond the Street’s average price target, while expanding Apple’s valuation on both a price-to-earnings and price-to-sales basis. Expect an intensified discussion about valuation. Meanwhile, don’t be surprised to see investors start musing on a potential eventual successor to Cook, who celebrates his 60th birthday in November 2020. The stock has appreciated more than five times since he took over from Steve Jobs in August 2011.

Write to Eric J. Savitz at eric.savitz@barrons.com

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Apple Was the Dow’s Best Stock in 2019. What Could Happen Next. - Barron's
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