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Apple stock rallies on earnings beat—here's what could happen next

Ivana Freitas
Apple easily beats on revenue and earnings—What 5 experts are watching now

Apple hit a record high Wednesday after topping earnings and sales estimates in its recent quarter.

Here's what five experts are watching now.

Dan Ives, managing director of equity research at Wedbush Securities, said this quarter was a knockout for Apple bulls.

"This is a jaw dropper in terms of results ... look at iPhones across the board and even China year over year up. Both major feathers in the cap for [CEO Tim] Cook and Cupertino going forward and I think ultimately, this really puts fuel in the bull thesis in terms of guidance and in terms of China. This is all the drumroll into a 5G upgrade cycle. In my opinion, A+ quarter and even more than even the bulls were expecting."

Tom Forte, senior research analyst at D.A. Davidson, said this quarter shows Apple expanding beyond the iPhone for revenue.

"I look at the December quarter as the story of calendar 2020 for Apple. So last year was a very challenging year for the company but a wonderful year for the stock as they basically focused on their non-iPhone revenue. To the extent that you have what looks to be a super cycle in the next-generation wireless network, 5G, that really plays to their strengths. So, the iPhone 11 really benefited from low expectations but, if you look at the setup for calendar 2020 with next-generation wireless network, I think Apple has got more gas in the tank for the stock."

Dan Niles, founding partner of AlphaOne Capital Partners, said valuations have gotten too extended and investors need to take a breather.

"I'm a hedge fund so for me the goal is to trade around positions and to get the best risk-adjusted return on it ... I'm glad I got out when I saw the numbers, because here's the thing, if you look at it ... all the beat is from iPhones, $4.5 billion of upside from that. Now the reason the multiple has gone up to 24 times and the stock has traded over its life at about 14 times PE is because people have sort of convinced themselves, 'Well, this is a services company and therefore the growth is more predictable.' They missed their services revenue by $300 million. It was supposed to be I think $13 billion, it came in at $12.7 billion. And the wearables piece, which is where I thought there'd be a lot of upside because you've heard a lot about Air Pods, that actually came in dead in line, so there's no upside. So, a hardware trades at a 10 PE, not a 25 PE."

Krish Sankar, senior research analyst at Cowen, praised the ability of a multibillion-dollar company growing at such a fast pace.

"No. 1, I think the iPhone momentum is still there, especially as you head into a 5G cycle. And what you have seen over the last six months is iPhone units get revised upwards. So, I think that momentum definitely helps the stock and the services are still holding up pretty well. ... You have a $15+ billion revenue business growing at mid- to high-teens growth rate which is pretty impressive."

Jim Suva, senior tech analyst at Citi, said revenue and earnings growth should continue to benefit the stock this year.

"If we look at the fundamentals about demand of what's happening with Apple, here's some dynamics that are very interesting. Some of their products such as Air Pods as well as Watch, are selling out. That's a great indicator for demand and it's not because they're having issues with production or yield issues. It's simply demand is so strong. We see this year's revenues growing about you know, 10% to 11% and earnings growing 20% to 21% and then we believe in April they're going announce another capital deployment of increasing the stock, buyback and dividend. So, we think estimates keep going higher, the company keeps making more money, and margins are also going higher. It's setting up for a very good opportunity and a reason why we think people should buy and own Apple stock."