Yesterday Patently Apple posted a report titled "Apple's Riding High and Heading for its Best Annual Performance in a Decade." Today, Gene Munster and his team over at Loup Ventures led with a story that talked up Apple Inc. as likely to continue outperforming its mega-cap tech peers next year which are referred to as FAANG stocks: Facebook, Amazon, Apple, Netflix and Google. Loup Ventures believes that apple could add another 20% gain in 2020 after it's dramatic 80%-plus 2019 rally.

Analyst Gene Munster cited a number of tailwinds for the shares over the coming 12 months, including continued growth for the Apple Watch and other 'wearables,' and excitement over 5G technology. The expected launch of 5G iPhones in the second half of 2020 is a positive catalyst, particularly given “easy” sales comparisons from 2019.

In Bloomberg's report titled "Apple Will Lead FAANG Performers Again Next Year," they note that Loup calculated that if Apple was valued similarly to other tech giants, 'fair value' would be between $350 and $400, compared with its Thursday close of $289.91. The base-case valuation of $350 is 'achievable in 2020,' the firm wrote, suggesting upside of nearly 21%. Loup said a $400 share price is within reach "sometime in 2021."

In 2020, “investors will begin to recognize Apple’s combination of hardware and services as a high-visibility and sticky business,” warranting a higher valuation, Munster wrote to clients. He predicted that Apple would again be the top performing FAANG stock in 2020, referring to a group of long-time tech leaders that also includes Facebook, Amazon.com, Netflix, and Google-parent Alphabet.

Apple has climbed about 86% thus far this year, putting it on track for its biggest annual percentage gain since 2009. It has easily outperformed FAANG peers this year; other returns range from Facebook’s jump of nearly 60% to Netflix rising less than 25%.

"Next year, wearables will be bigger than Mac,' Loup wrote, seeing "significant room to grow," for the Apple Watch given its international potential.

Loup Ventures’ 2020 Tech Predictions

On Loup Ventures web site they note that "Apple Will Be the Best Performing FAANG Stock in 2020 (by Gene Munster). There are five reasons why we believe Apple will be the top-performing FAANG stock in 2020, as follows:

1. Easy iPhone Comps: Apple is likely to meet or exceeded analyst expectations in 3 of the 4 quarters in 2020 based on easy iPhone comps. iPhone will account for about 52% of revenue in 2020 with favorable year-over-year comparables: -15% in Dec-19, -17% in Mar-20, -12% in Jun-20, and-9% in Sep-20.

2. Continued Growth in Apple Watch: Wearables growth should continue to benefit from widespread consumer adoption, along with a new version of AirPods (better battery), Apple Watch, and the release of Apple Tags (like Tile) late in the year. Next year, wearables will be bigger than Mac, accounting for 11% of revenue, up from 8% in CY19. We believe AirPods will account for 5.8% of Apple’s overall revenue, Apple Watch 5.5%, and Beats at 0.3%. Our model suggests despite larger numbers, wearables growth will remain impressive at 45% next year, compared to 58% in CY19 and 44% in CY18. As mentioned, Apple Tags will likely be new to the category in 2020, contributing fractional revenue in 2020. Apple Tags will attach to keys, wallets, and other belongings to keep track of their location. Beyond 2020, Apple Watch has significant room to grow, given that global Apple Watch adoption remains nascent. We expect 20-30% Apple Watch unit growth for the next five years. We estimate that about 9% of iPhone owners use an Apple Watch today, based on a 3-year expected life. Long-term, we believe the attach rate could reach 40%, which implies about 125m units a year compared to our 36.8m estimate for Cy20. This implies that about 12% of Apple’s overall revenue will be from the Apple Watch in 2025 ($48B in Apple Watch revenue out of $385B in overall revenue in 2025).

3. Five New iPhone Models in 2020: Revenue growth will be driven by the release of up to five new iPhone models compared to 3 new phones in the each of the past two years. Most notably, we expect a new version of the iPhone SE in the first half of the year and two iPhone models with 5G announced in September.

4. Investor Anticipation of 5G: 5G will be the biggest iPhone upgrade cycle since CY15, which benefited from the first full year of the larger screen iPhone 6. Beginning in 2020, investors will begin to anticipate the upcoming cycle. Long-term, we believe the 5G cycle can deliver two years of 10% iPhone revenue growth, compared to our expectation of iPhone revenue essentially flat in CY20. That said, the iPhone 5G cycle will hit full stride in CY22 and CY23. We expect the product’s first full year (CY21) to disappoint investors due to lack of 5G coverage from wireless carriers, which will act as a governor on iPhone 5G adoption.

5. AAPL Will Be Rewarded With a Proper Tech Multiple: We expect AAPL’s earnings multiple to increase in 2020. Investors will begin to recognize Apple’s combination of hardware and services as a high-visibility and sticky business. The prevailing investor view is that shares of AAPL should be undervalued relative to peers based on a belief that the company’s risk profile is relatively higher, because 75% of its revenue comes from hardware. Over the past decade, Apple’s results have shown that the combination of hardware, software, and services can deliver earnings, the most important measure of financial strength, that exceed other tech companies with higher multiples. Over the next year, we believe investors will gain confidence in applying a more services-like multiple to AAPL given the hardware business (iPhone and wearables) will deliver revenue visibility similar to traditional services businesses.When compared to other tech and services companies, we consider the fair value for AAPL to be $350 (21% upside) to $400 (38% upside).

One could only imagine how much higher Apple's stock (AAPL) could actually go if there's still a few more surprises in store for us in 2020.

In a report like this, let it be known that Jack Purcher of Patently Apple does not own Apple (AAPL) stock at this time.