Apple has had a blowout 2019.
The stock has soared 74% this year, easily the best performer on the Dow and tracking for its best annual increase in a decade. Those gains have added $473 billion to its market cap, the equivalent of nearly double Disney's entire value.
This could be as good as it gets for Apple right now, says JC O'Hara, chief market technician at MKM Partners.
"Momentum is definitely strong, and our concern is that it actually might be too strong, leaving Apple vulnerable," O'Hara said on CNBC's "Trading Nation" on Friday. "If you look at where Apple's trading, especially compared to its 200-day moving average, we find it's 28% above that. The average S&P 500 stock is just 5% above its 200-day moving average."
"Historically when Apple reaches these heights, it's vulnerable over the next few months of actually consolidating sideways," said O'Hara. "While we're not negative on Apple, we just think it might be vulnerable for a little back-and-filling because it might become a victim of its own success here."
Steve Chiavarone, portfolio manager at Federated Investors, says Apple's mammoth move this year was justified by its changing business model.
"2019 was about the rise of the services, so the company rerated from almost 11 times [forward earnings] to 20 times because they convinced the marketplace that they were now a recurring services company with stable revenue," said Chiavarone.
The service segment now accounts for 18% of total revenue for Apple, twice the percentage in 2013.
"What's going to be interesting as we go to 2020, I think it's going to be the revenge of the hardware. With 5G ahead, you could see a big chunk of this installed base upgrade in order to get those faster internet speeds," he said.
A potential refresh cycle paired with a consistent and growing recurring revenue business has Chiavarone bullish over the long haul.
"There could be some short-term noise, but long-term we still think this is a great company," he said.
Disclosure: Federated has a position in Apple.
