Apple is set to be the best-performing of the big technology stocks for the third year running in 2021, outperforming peers like Facebook and Google, according to US-based Loup Ventures.
The venture capital firm said in a set of annual predictions that it expects the performance of the FAANG group of technology heavyweights to "fracture" next year, with Apple and Amazon already making much stronger gains this year than Facebook, Netflix and Google.
“This is the third consecutive year we have made this prediction. In 2019, Apple was the top performer, and the stock is set to repeat in 2020,” Gene Munster, managing partner at Loup Ventures, said.
“The accelerating digital transformation means more people are working and learning from home, providing a continued tailwind for the iPad and Mac businesses,” he added.
The Mac and iPad businesses, which contribute almost 25 per cent of Apple's total revenue, can grow more than 10 per cent in the next couple of years, compared with the flat growth experienced over the past few years, Loup Ventures said.
"There is a saying attributed to Lenin … nothing can happen for decades, and then decades can happen in weeks," Sam Blatteis, chief executive of The Mena Catalysts, which advises technology companies on policy and government affairs in the region, told The National.
“It took Apple 42 years to reach $1 trillion in value, and 20 weeks to accelerate from $1tn to $2tn …[from] March to August 2020,” said Mr Blatteis.
Earlier this month, Japanese newspaper Nikkei reported that Apple plans to produce up to 96 million iPhones in the first half of 2021, a 30 per cent year-on-year increase, after demand for its first 5G handsets surged amid the Covid-19 pandemic.
This, along with reports that Apple is planning to produce its first electric car in 2024, added to investors' confidence and buoyed the company's shares.
Apple’s stock ended the regular session on Tuesday at $134.87, down 1.3 per cent. In intraday trading, it reached an all-time high of more than $138 a share.
“While the December quarter demand is constrained by supply, we believe stronger-for-longer demand for Apple’s products prevails through[out] fiscal year 2021 as the economy recovers,” Citigroup analyst Jim Suva wrote in a note to clients this month.
“Apple has evolved from a product company to a platform company that includes services such as software, storage, music, digital payments … looking ahead, we believe Apple will not only continue to grow its services business but also get increased traction with the enterprise,” he added.
As of Tuesday's close, Apple's shares have gained 80 per cent in value since the start of the year. Amazon's stock is up 75 per cent, Netflix 61 per cent, Facebook 32 per cent and Google 28 per cent.
"In 2021, we expect the strongest performance coming from Apple and Amazon, separating themselves from the rest of the group," Loup Ventures said.
Mr Munster said he is "on the fence" on Google's valuation. On the upside, he believes other ventures outside of its core search business are underappreciated, but on the downside it faces potential regulatory headwinds.
“We have more modest expectations for Facebook’s and Netflix’s stock performance, given potential regulatory headwinds for Facebook and a reversion to the mean for streaming content consumption,” he added.
Overall, technology companies are expected to continue growth in 2021, analysts said.
"If the interest rate rise is well behaved and the US 10-year yield stays below 2 per cent, then our guess is that technology stocks will continue to rise," Peter Garnry, head of equity strategy at Saxo Bank, wrote in a note.
“If we move beyond 2 per cent on long-term yields, then the rate-sensitive stocks (the super aggressively priced growth stocks) could experience a seismic change in valuation and a dramatic collapse in their stock prices,” he added.
The Danish investment bank predicted that the big headline for next year could be the “breaking up” of Facebook or “forcing Google to open up technology” in search to ensure fair competition in the market.
“We saw similar moves in the 1960s with IBM and AT&T/Bell Labs, so it could happen again,” said Mr Garnry.
US technology companies attracted the highest trading volumes among Saxo Bank investors in the UAE and around the world in 2020 amid the coronavirus pandemic, the bank said on Tuesday.
Tesla and Apple tied for first as the most popular stocks for UAE investors, followed by Microsoft, Amazon and Chinese electric vehicle manufacturer Nio.
“In 2021, as companies are forced to adapt or go the way of the dinosaur … the future-oriented tech narratives are stunningly powerful … firms that fit them receive a valuation that reflects estimates of cash flows 10 years from now,” said Mr Blatteis, who is the former head of Gulf government relations and public policy at Google.
“Investors focus on a firm's vision, its long-term narrative, not profit now. Costs are too often seen as just investment," he added.