Stocks to Buy
The Best Stocks to Buy Now
The coronavirus pandemic has erased all the gains stocks saw in early 2020, officially ending an 11-year bull run. Volatility isn't over, and the impact of the virus on daily life, markets, and the economy is just beginning to be felt.
While the fallout from the global COVID-19 outbreak in the coming months could be devastating – an increasing number of confirmed cases, school and business closings, wild market swings – the long-term investing picture is still the same.
Global growth will continue. A decline in manufacturing and consumer spending over the next few months will cause growth to slow, but it will not stop completely.
It might seem hard to believe, but it’s more important than ever to have your "stocks to buy" list polished and ready to go – because what we’re being presented with is a generational buying opportunity.
Stocks will eventually bounce higher, and the goal is to get in before the first bounce.
Don’t worry about trying to time the bottom. Buying now, on the way down and on the way up, means you're still getting in at a lower price than where stocks will eventually go.
We don’t recommend putting in all your cash at once; instead, buy a little at a time. Even if prices go lower, you're essentially “averaging down” and getting in at a lower cost overall.
That’s exactly how you build wealth over time.
To get you started, we've identified the seven stocks below as ones with outstanding short-term and long-term profit potential.
One could be worth over $2 million per share in the next 40 years.
Another is on the cutting edge of the world's next $1 trillion industry.
A third has developed a life-saving technology so vital, we predict it could double your money in the next few years alone.
This could be the only chance you have in your life to get into great companies at such low prices. If you missed 2008’s buying opportunity, don't worry.
You have now.
To join Money Morning and receive The COVID-19 Impact on Economies, Markets and Stocks: The Good, Bad & Ugly Roadmap right away, enter your email below:
The economic and market impact of COVID-19 is like nothing we've experienced. This just-released report shows you what the fallout will look like.
The Best Tech Stock to Buy Now: Alibaba Group
Who They Are: Alibaba Group Holding Ltd. (NYSE: BABA) is one of the world's largest e-commerce companies with a market cap over $540 billion. It operates a network of sites in China.
The company isn't just focused on e-commerce. Alibaba has expanded into cloud computing, digital media, entertainment, and even healthcare platforms. Because of this growth, Alibaba is often referred to as the "Amazon of China."
In fact, its earnings over the last 12 months doubled Amazon's. If it were priced the same way Amazon was, its stock would skyrocket 298%.
Why Now Is the Time to Buy: Money Morning Executive Editor Bill Patalon has repeatedly called Alibaba a "single-stock wealth machine" – one you can buy and hold for decades to come.
We see every share of Alibaba you buy – trading around $220 at the start of 2020 – being worth $2.1 million in four decades.
That's why Bill says Alibaba is "one of the single greatest wealth opportunities of our lifetime – meaning it's a stock you have to own."
There are three big reasons behind Alibaba's potential…
Why to Buy BABA: The Biggest Shopping Day of the Year
The biggest day of the year for Alibaba is "Singles Day," the anti-Valentine's Day tradition that Alibaba has turned into a global shopping event. In November 2019, more than $38.4 billion was spent by more than 500 million people worldwide over Alibaba's networks of sites. It was the most money ever spent on a single shopping event. And the number of buyers was more than the combined population of the United States, Mexico, and Canada.
The buying was so frenzied that more than $1 billion was spent by consumers in just 68 seconds. Ten billion dollars was spent in the first 30 minutes.
That's more than twice what shoppers spent on Black Friday and Cyber Monday last year combined.
There is truly nothing like Singles Day anywhere else in the world. And the holiday is only growing.
Market Chaos Action Plan: Coronavirus panic has the market unhinged. Get three strategies for beating volatility, including the most powerful wealth-building tool for buying low. Click here now…
Those 2019 numbers represented a 25% increase from 2018.
And that staggering sales growth has translated to a significant earnings boost…
Why to Buy BABA: Alibaba Is an Earnings Machine
For such a large company, Alibaba is still growing its earnings at a breakneck pace.
For the full year 2020, BABA is expected to earn $7.20 per share. That would be a 29% increase from FY 2019.
Those earnings are expected to climb 23% to $8.80 in 2021 and 27% to $11.24 in 2022.
Those estimates are likely conservative.
After all, Alibaba has crushed earnings estimates by an average of 21% each of the last four quarters.
Revenue is expected to grow at a similar pace. Consensus estimates call for 32% revenue growth in 2020 and 30% in 2021.
It's really no surprise the company has an impressive 34.4% profit margin. Since its founding in 1999, Alibaba has had one of the most innovative leadership teams in the world…
Why to Buy BABA: The Right Leader Is Guiding the Way
Singles Day 2019 was the first since visionary founder Jack Ma left the company.
There was a lot of nail-biting on Wall Street when Ma's retirement was announced in 2018. But in fact, the care with which Ma's succession was handled only demonstrates what an exceptionally well-run company Alibaba is.
CEO Daniel Zhang, who took over as executive chair in September 2019, was the creator of the Singles Day sales event.
Since he became CEO in 2015, Alibaba became the first Asian company to pass $400 billion in market value and has emerged as one of the top 10 most valuable public companies in the world.
Even with Ma's departure, there's no reason to think to the company will slow down. Between Alibaba's business model and rapid growth in Asia, this is the online retail giant with the most room to grow in the next few decades.
The Best Healthcare Stock to Buy Now: Edwards Lifesciences
Who They Are: Edwards Lifesciences Corp. (NYSE: EW) is a medical equipment manufacturer specializing in transcatheter heart valves. These devices save the lives of people with heart complications who are unable to undergo surgery.
Edwards Lifesciences has been in business for 60 years, and it manufactures the most frequently used valves in the world.
Why Now Is the Time to Buy: As the rate of heart disease increases in America, so is Edwards' revenue. Edwards is expected to grow revenue by 11% in 2020, while earnings should grow 12%.
Money Morning Defense and Tech Specialist Michael Robinson says if you buy now, Edwards Lifesciences Corp. could double your money in three and a half years or less.
Let's look at what this stock has to offer…
Why to Buy EW: Life-Saving Technology
Heart disease claims more than 650,000 American lives per year. That death rate from coronary heart disease rose by more than 30% between 2006 and 2016.
And it's getting worse.
The American Heart Association predicts that by 2035, approximately 131 million people in the United States alone will have at least one health problem related to heart disease.
One of the most serious and common problems associated with the heart is aortic stenosis. That's when the aortic valve narrows and restricts blood flow.
But not all patients qualify for surgical valve repair or replacement, due to the risks involved. That's where the lifesaving devices from Edwards come in. The artificial valve is implanted via a catheter through the chest or leg.
With heart complications rising dramatically, Edwards is going to be one of the leading companies extending people's lives with this minor procedure.
Why to Buy EW: Rock-Solid Operations
Edwards Lifesciences developed its first heart valve back in 1960. It was a labor of love for Miles "Lowell" Edwards, who became consumed with the idea of healing people's hearts after he suffered two bouts of rheumatic fever as a teen.
Today, the company brings that same methodical determination to every aspect of the business.
Edwards's $1.1 billion in sales last quarter was a 19% improvement from the year before. Earnings per share came in 32% higher.
Why to Buy EW: Double Your Money in Less Than Four Years
Looking at EW's earnings growth, Michael projects the stock should double in value within three and a half years.
That's a conservative estimate. It assumes that the company's current earnings growth will drop by an average of 20% in that time.
So even if you believe some of the Wall Street noise about healthcare stocks declining, it doesn't hurt the case for this stock. There's plenty of room for EW's performance to slip and still double your money in under four years.
And if it keeps performing as it has been, you'll be pocketing your gains even sooner.
The impact of the coronavirus on markets is very real. Yet when handled correctly, this can be one of the most important wealth-building moments of your lifetime. Subscribe below to access this report.
The impact of the coronavirus on markets is very real. Yet when handled correctly, this can be one of the most important wealth-building moments of your lifetime. Subscribe to Money Morning and immediate access to The Complete Guide to Protecting Your Portfolio from the Coronavirus.
The Best Dividend Stock to Buy Now: Colony Capital
Who They Are: Colony Capital Inc. (NYSE: CLNY) is a global investment firm located in Los Angeles, Calif. While most REITs focus on one or two real estate markets at most – apartments and shopping centers, or office buildings – Colony is more diverse, getting involved in multiple commercial real estate markets, private equity, debt management, and more.
That's a big part of why it's our top REIT pick for 2020.
Why Now Is the Time to Buy: After the March sell-off, CLNY shares traded for just under $3.50 each, and we think it could climb to six times that much. Add in a 12% dividend yield, and it's easy to see why Colony Capital is the must-have REIT for 2020.
Let's break it down…
Why to Buy CLNY: Colony Is Out of Favor on Wall Street
Colony Capital is no Wall Street darling. That's good news for us. It means we can establish a stake at today's rock-bottom price and then wait for "the herd" to catch on.
Colony is priced to grow. It's trading recently as low as $3.50 because the future potential has not yet been priced in.
Shares were as high as $15 three years ago, until Colony entered into a three-way merger with NorthStar Realty Finance and NorthStar Asset Management to create the fifth-largest real estate management firm in the world.
When none of the expected benefits, like the projected cost savings, came to pass, Wall Street dumped the stock in droves.
Now Colony is ready to enter a new, profitable chapter…
Colony today is a hodgepodge of multiple REIT groups, an alternative asset management company, two stakes in public companies (NorthStar Realty Europe and Colony Credit Real Estate), and a maze of other real estate fund investments. Its unusual profile has left Wall Street reluctant to cover it. Traditional REIT investors have avoided it, but we don't see it staying that way.
To quote Warren Buffett, Colony gives us plenty of reasons to "be greedy when others are fearful"…
Why to Buy CLNY: Colony Capital Is a Remarkable Value
Being inexpensive alone doesn't make a stock a bargain. But with Colony Capital, we're getting a fantastic deal.
Colony has assets under management of $49 billion. The book value of its total collection of assets is $8.64 per share. That's more than double its share price of $3.50 from early March.
CLNY's price to tangible book value is 0.36. That means you're paying just $0.36 on the dollar for cash-generating assets. If Colony were liquidated, you'd probably come away with close to two to three times today's share price.
Founder and CEO Tom Barrack is in the process of doing almost just that, with a plan that will boost our returns even more.
That brings us to the No. 1 reason Colony Capital is the top REIT to buy now.
Why to Buy CLNY: Colony's Pivot to Digital Means Huge Profit Potential
Colony Capital is in the midst of a massive restructuring plan that should pay off handsomely.
Barrack's goal is to sell off the existing real estate portfolio and make Colony the leading digital REIT in the United States. Colony recently sold all its industrial properties to private equity and real estate giant Blackstone for nearly $6 billion. In July, Colony acquired Digital Bridge Holdings LLC for $325 million. Digital Bridge oversees $20 billion in digital infrastructure assets, including cell towers and data centers.
Digital Bridge Co-Founder and CEO Mark Ganzi will replace Barrack as CEO of Colony Capital by 2021. Barrack will return to his previous role as executive chair.
Making Ganzi the new CEO of "Colony 2.0" is a smart move. Ganzi built Digital Bridge into a leading digital real estate investment management firm with more than $14 billion in assets under management. The newly restructured Colony will focus on owning cell towers, data centers, fiber optic cable systems, and antenna systems critical to rolling out 5G.
It's worth nothing that Barrack owns 28 million shares of CLNY – nearly all his net worth. So in trying to save the company, he's also trying to rebuild his own fortune.
That's a big incentive to right the ship.
We expect CLNY to really take off over the next year as Colony transitions to a 5G-fueled powerhouse in the digital realty space.
The turnaround won't happen overnight, but Colony is off to a good start. Right out of the gate, it operates and manages more than 350,000 sites and 38 data centers globally. And it's already made four digital investments in South America, Finland, the UK, and Canada.
To give you an idea of the potential here, Colony Capital currently sells for about half its book value. Meanwhile, Digital Realty, a leading digital REIT, sells for about three times its book value.
If we apply a similar multiple to a refocused digital Colony, we come away with a stock worth six times its current share price.
Bonus: With Colony's 12% dividend yield, you'll be well-paid during the transition.
The Best Growth Stock to Buy Now: SoftBank
Who They Are: SoftBank Group Corp. (OTCMKTS: SFTBF) is a Japanese holding company run by Masayoshi Son. Son made his name by investing $20 million in Alibaba Group Holding Ltd. (NYSE: BABA) in 2000. By the time BABA went public 14 years later, Son's stake was worth $70 billion. Today Son and SoftBank run the Vision Fund, a $100 billion private equity fund that invests in promising young tech companies.
Why Now Is the Time to Buy: Money Morning Executive Editor Bill Patalon has called SoftBank the "Berkshire Hathaway of tech."
Son's eye for enterprises with long-term potential is a lot like Warren Buffet's. Only Son is 30 years younger, and his talent applies to the most promising, world-changing sector in the world today.
Here are three reasons to buy and hold Softbank stock…
Why to Buy SFTBF: Get In on the Biggest Wealth-Building Opportunities in the World
As a private equity fund, SoftBank's Vision Fund often invests in companies years before they've gone public. These are firms that the average investor simply doesn't have access to.
When they finally do go public, the share prices are much higher for the general public than they were for institutional investors. That's why we say the IPO process is rigged against retail investors like you, in favor of the banks and early investors.
But when you own shares in SoftBank, you get to be one of those early investors. In other words, SoftBank tilts the game in your favor as a shareholder.
Take a look at some of the young companies Vision Fund has invested in.
Plenty is a Bay Area company that brings fresh produce to urban centers via vertical farming: i.e., growing plants on walls instead of space-consuming fields. The goal is to feed entire populations across the globe inexpensively and efficiently.
Brain Corp. builds artificial intelligence that can be installed in existing, non-intelligent machines. Put Brain's cloud-based systems in a fleet of floor cleaners, and they can work together to get a mall or stadium looking spotless with almost no human guidance. Customers can also build their own robotic machines by assembling off-the-shelf parts.
OneWeb aims to do exactly what its name suggests: provide Internet access for the entire world. It plans to launch nearly 900 satellites in space over the next few years and offer low-cost, reliable access at ultra-high speeds across the globe.
The profit potential of these companies is enormous. Remember that every dollar Son invested in Alibaba was worth $3,500 14 years later… and that he's the man in charge of the Vision Fund's investments.
The Vision Fund has already delivered a 62% return in its first two years. But that's just the start…
Why to Buy SFTBF: Ride the Coattails of One of the World's Greatest Investors
Berkshire Hathaway became one of the most sought-after stocks for one reason: Warren Buffett. The Oracle of Omaha knew how to spot good investments, and a share of his company meant investors could benefit directly from his genius.
The same is true for SoftBank and Masayoshi Son. It would be great to go back to 2000 and have the vision (and money) he had to invest in Alibaba. But the next best thing is to make an investment that lets you benefit when he makes other winning bets.
SoftBank has already launched another fund, this one worth $108 billion, to invest in new ventures. There's no reason to think Son is going to slow down anytime soon.
Why to Buy SFTBF: 3,200% Growth in the Next 20 Years – or More
Son has predicted that SoftBank's investment portfolio will be worth ¥200 trillion ($1.85 trillion) in two decades. That's a 33-fold increase.
The value would have to grow 19% per year to reach that goal.
It's a tall order, but considering the Vision Fund's performance so far, Bill thinks it's a conservative estimate.
"This is a quintessential wealth-building opportunity," Bill says, "a company positioned to capitalize on powerful trends like AI, communications, microchips, e-commerce, and more."
In other words, SoftBank at its current price is an opportunity you don't want to wait on.
The Best Defense Stock to Buy Now: Lockheed Martin
Who They Are: Lockheed Martin Corp. (NYSE: LMT) is the world's largest defense contractor in terms of revenue. In 2019 alone, the company brought in just under $60 billion in sales.
Lockheed works with more than 20 government agencies and counts the U.S. Department of Defense as one of its biggest partners. Its subsidiary, Sikorsky, provides military and rotary-wing aircraft to every branch of the U.S. military. It also sells its products to 40 other countries.
Globally, Lockheed employs more than 110,000 people.
Why Now Is the Time to Buy: Military and defense stocks are a popular staple in just about any portfolio. Their government contracts offer shareholders resilience when economic uncertainty looms, plus growing demand gives them upside potential to boot.
And Lockheed is one of the best stocks on the market.
Money Morning Chief Investment Strategist Keith Fitz-Gerald has a specific stock screen he uses when the markets are extremely volatile. Lockheed easily passes the test.
Why to Buy LMT: The Financials Are Absolutely Rock-Solid
With these six parameters, you'll find companies with rock-solid fundamentals that act as excellent stores of wealth:
- Market capitalization greater than $1 billion.
- Altman Z-Score greater than 2.
- Yield above the average S&P 500 stock.
- Payout ratio less than 60%.
- Dividend growth greater than 5% over the past five years.
- At least two consecutive years of dividend increases.
Make no mistake; Lockheed has been beaten down mercilessly. On the surface, that looks terrible, but the business case – to Keith's point – remains rock-solid:
- Fundamentally strong defense contractor with a $115 billion market cap.
- Yield 2.2%.
- Payout ratio is a low 41%, meaning there's plenty of extra capacity.
- Five-year dividend growth rate is 10.3%.
- 18 years of dividend increase.
The company has top line growth from $47.25 billion in 2016 to $59.8 billion in 2019, and that's not something that will simply vanish… virus or no virus, no matter who's in the White House, no matter what the Fed does next.
Why to Buy LMT: Defense Spending Is Still Soaring
The 2020 Pentagon budget did not get much attention when it passed, probably because it was overwhelmingly supported by the House in a 377-48 vote. But the numbers are staggering. All told, the 2020 bill is worth $738 billion.
Looking more closely at the budget, $57.7 billion is dedicated to aircraft alone. As we noted earlier, LMT supplies aircraft to all five military branches, making it one of the biggest winners of this nearly $60 billion slice of the budget.
And we're already seeing the contracts roll in. On March 9 (the same day the S&P 500 dropped 7%), Lockheed announced it won a $16.2 million contract to supply upgrades to 14 C-130L "Super Hercules" airlifters.
As more contracts are announced throughout the year, you can expect to see Lockheed's name attached to many of them.
Why to Buy LMT: Industry-Leading Dividend Growth
Right now, LMT offers investors a dividend yield of 2.55%, good for $9 per share annually.
Most impressive of all, LMT has been growing its dividend payment by at least 10% annually since 2010.
Holding a stock like Lockheed for the long term, especially when it's growing dividend payments, is one of the best investing strategies available.
Keith crunched the numbers, and they're jaw-dropping. Here's how that dividend growth could impact your portfolio with an initial investment of $10,000.
"Assuming the dividend increases by 10% annually and the stock remains flat, you'll have $14,231 in 10 years," Keith said. "That's a 42.31% return. It's not glamorous, but keep in mind that you would have earned $946 in dividends by year 10, which works out to an impressive 9.46% yield… just because you kept your money moving consistently and efficiently."
"In 30 years, you'd be sitting on $218,208 and a 118.2% return," he continued. "Most impressively, though, you'd be earning an eye-popping $65,666 in dividends just for that year ($49,249 after a 25% capital gains tax) that amounts to a 392% yield on your initial $10,000 investment!"
When the markets are as turbulent as they are now, buying a dividend stock like LMT and holding for the long term is one of the best decisions you can make.
The Best Cannabis Stock to Buy Now: Constellation Brands
Who They Are: Constellation Brands Inc. (NYSE: STZ) is the beverage giant behind Corona beer, Ravenswood wine, and Svedka vodka. Now the company is expanding into the legal cannabis market. And it's the best cannabis stock to buy before legalization becomes even more widespread.
In 2017, Constellation Brands became the first Fortune 500 company to invest in legal cannabis, buying a $191 million stake in Canopy Growth Corp. (NYSE: CGC). Since then, it has upped its investment to more than $4 billion.
Its favorable position to capture much of the recreational cannabis market has analysts at the National Institute of Cannabis Investors (NICI) calling it a "stock to retire on."
Why Now Is the Time to Buy: Constellation is a powerhouse company you'll want to keep in your portfolio on a very long-term basis – because it's only going to grow every year. Its beverage lineup alone makes it a great buy. And as the market for cannabis-infused beverages opens up in Canada and elsewhere, its partnership with Canopy gives it a leg up now that cannabis-infused beverages are legal in Canada.
It's more than legalization fueling Constellation Brands' rise. There are three reasons this stock will be making shareholders a fortune…
Why to Buy STZ: Constellation Is Already an Outstanding Blue-Chip Company
While many cannabis companies are young startups without a proven track record, Constellation has already built a massively profitable empire with its beverage brands, averaging over $2 billion in profits each of the last four years.
The road to success wasn't always an easy one. Going back to the late 1980s, Constellation lost 70% of its value over three and a half years. But it bounced back in a big way in the 1990s, and it has since acquired some of the most recognized brands in beer, wine, and spirits.
Analysts at NICI have called CEO Bill Newlands and the controlling shareholders "the best management team of any company in any industry in the world."
Constellation also pays a dividend, which you won't get from any pure play cannabis stocks. The 1.6% dividend yield can help you ride out any turbulence along the way to greater and greater wealth.
Why to Buy STZ: Canopy Is One of the Largest Growers in Canada
Constellation now holds a 38% percent stake in Canopy. So an investment in Constellation is also an investment in Canopy – which is definitely to investors' advantage.
Canopy was already one of the dominant players in the Canadian medical cannabis market when Constellation made its investment. Canopy has the highest revenue of all Canadian marijuana companies. Now armed with a multibillion-dollar war chest, Canopy has made a slew of acquisitions all around the world.
That includes a deal with U.S.-based Acreage Holdings Inc. (OTCMKTS: ACRGF), which sets up a potential acquisition that will be triggered if the U.S. federal government legalizes cannabis. The move ensures that Canopy – and Constellation Brands – will be ready to pounce if the U.S. market opens up on a broad scale.
Canopy isn't limiting its scope to North America either. It has acquired cannabis enterprises in European countries as well, including Spain and Denmark. In May 2019, Canopy acquired the German company Cannabinoid Compound Co., or C3, the largest CBD-based pharmaceuticals company in Europe.
At this point, you might be tempted to buy shares of Canopy too. There's certainly nothing wrong with that. But buying Constellation gives you an extra level of profit potential; here's why…
Why to Buy STZ: Cannabis Beverages Are Ready to Explode
Cannabis-infused beverages are set to be legal in Canada in December 2019. And they are a prime candidate to take over as the cannabis consumption method of choice for a number of reasons…
First, they are simply a more familiar option to many people. A Canadian government survey showed 77% of adult residents drink alcohol, but only 17% smoke.
And unlike alcohol, cannabis is calorie-free, giving drinkers an alternative that won't contribute to weight gain. (Researchers are currently working out ways to eliminate the infamous "munchies" experienced by some marijuana users.)
Plus, cannabis doesn't cause hangovers.
So Constellation and Canopy have a chance to attract not just cannabis users looking for new consumption methods, but also drinkers who want the kick without the side effects.
Constellation already has a dominant beverage empire. Add cannabis to the mix, and the sky's the limit.
The Best "All-Around" Stock to Buy Now: Apple
Who They Are: Apple Inc. (NASDAQ: AAPL) is one of the most recognizable companies in the world, with a market cap topping $1.2 trillion, even after the coronavirus sell-off.
The company is best known for its tech devices including the iPhone, Mac computer, iPad tablet, Apple Watch, AirPods, Apple TV, and Beats headphones. But the company is more than its devices. Apple is renowned for its Apple Care support services, digital content streaming services, cloud storage, and even the cashless payment service Apple Pay.
Founded in 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne, the company is now run by one of the world's most recognizable execs, Tim Cook.
Why Now Is the Time to Buy: For years, Wall Street analysts have been wringing their hands over every little bit of bad news for Apple. Whether it's an earnings miss or a production slowdown or the specter of hitting "Peak iPhone," there's always a reason for investors to jump ship.
Late 2018 was the perfect example of this.
AAPL shares slipped 26% in October and November. That was due to a number of factors, including unimpressive iPhone sales, tariffs threatened by U.S. President Donald Trump, and the general downturn in the market. It also slipped nearly 16% from mid-February to mid-March during the COVID-19 panic.
But none of these are real long-term threats for Apple. In fact, AAPL stock still climbed 53% from March 2019 through March 2020.
Because of Apple's long-term performance and reliability, Money Morning Executive Editor Bill Patalon considers it one of his "Accumulate" stocks. That means it's a stock you can keep buying more of year after year to increase your wealth.
Why to Buy AAPL: Apple Is More Than Its Devices
Apple is not a device company anymore.
That is, it's not unit sales of Apple devices that are driving the company's growth. It's the services Apple delivers to the devices people already own.
Sales of those services, including Apple Music, iCloud, and the App Store, hit $12.5 billion in the last quarter of FY 2019. That puts them on pace for a record $50 billion annually.
Overall, the company is expected to bring in an astronomical $279 billion in revenue in 2020. That's an increase of 7% from full-year 2019 numbers. In 2021, revenue is expected to jump nearly 10% to $307 billion.
And according to Money Morning Chief Investment Strategist Keith Fitz-Gerald, it won't be "devices" that continue to push Apple's revenue numbers higher.
"Apple is making a fundamental pivot into services and, specifically, into the single most lucrative market in the world… healthcare," Keith says. "The U.S. medical market alone for Apple-powered medical devices may be three times the entire global iPhone market. That pencils out to around $300 billion, in case you're wondering, all of which is a far higher margin."
Why to Buy AAPL: Apple Has Its Sights Set on Healthcare
Growth estimates for Apple are healthy – but we see them as underestimating the profit potential here.
In 2019, Morgan Stanley (NYSE: MS) did a deep dive on Apple's healthcare opportunity. The investment bank concluded that healthcare could add anywhere from $15 billion to $313 billion annually to Apple's top line. The report pegged the midpoint at $90 billion of additional revenue by 2027.
Revenue for Apple's 2019 fiscal year (which ended Sept. 30) was $260.17 billion. So if the Morgan Stanley report is right, that represents a revenue increase of nearly 35%.
At Apple's price/earnings (P/E) ratio at the time of the report of 22, you end up with a stock price of about $360 per share.
But Morgan Stanley's midline of $90 billion of additional revenue isn't in the middle of its range. The mathematical midpoint is actually $164 billion of additional revenue.
If you round that down to $150 billion, you end up with a projected share price of $422.
The price can even get there by 2021 if Wall Street wakes up to what's happening.
The approximate revenue required just to get AAPL to $400 is $120.68 billion. Given the range in the Morgan Stanley report, that's not particularly outlandish.
And even though we've focused on "services" so far, Apple's devices are still an absolute cash cow…
Why to Buy AAPL: Apple's Device Sales Remain Rock-Solid
Apple's hardware sales continue to expand the installed base of Apple users. In Apple's most recent quarter, the company said half the customers who bought a Mac were new to the platform.
One-quarter of those who bought an iPad were new to the iPad.
The installed base matters because all those users – approximately 1 billion people own at least one Apple device – are also signing up for Apple's services. And that's where most of its revenue growth is coming from now.
Apple services include Apple Music, the App Store, the Apple-branded credit card, iCloud, and the just-launched Apple TV Plus streaming service.
Whatever happens with healthcare, Apple's services are expected to grow rapidly over the next few years. Morgan Stanley estimates revenue from Apple services will more than double from $46.3 billion in FY 2019 to about $100 billion in FY 2025.
Because services have much higher margins, that increased revenue will disproportionately fatten Apple's bottom line. RBC Capital Markets has estimated services will account for more than half of Apple's profits by then.
Are Stocks a Good Investment?
Yes, stocks are a good addition to any investment portfolio. Over time, stocks can be the most successful way to build wealth.
Stocks typically offer higher returns than other investment vehicles, like real estate and bonds. We identify the factors that make stocks a good long-term wealth builder and give investors those picks regularly.
Trading stocks by trying to time the market for short-term gains is much riskier. It can be done successfully – and profitably – but if it's done without proper research and analysis, it often results in big losses.
How Do You Pick the Best Stocks?
One key step to pick the best stocks to buy is to examine a company's earnings reports over time to analyze the firm's financial health. The most important metrics to measure are earnings per share (EPS) and the price/earnings (P/E) ratio.
EPS is the portion of a firm's profit distributed to each share of stock. It's the most basic and important number for measuring a company's profitability, it and helps to calculate valuation metrics like the P/E ratio.
The P/E ratio shows how much investors can invest in a stock to recoup one dollar of earnings. In other words, it shows how much people will pay for every dollar a company earns. The ratio is calculated by dividing the most recent share price by the most recent EPS.
What Are Other Good Stocks to Buy in 2020?
The stocks we mentioned here are a great place to get started. But if you're looking to expand your portfolio, keep up with Money Morning throughout the year.
We'll be offering expert recommendations periodically, and every few weeks, we publish a list of the best stocks to buy now based on the most up-to-date information available.
And if you're looking for more ways to profit, we've got you covered…
A Lifetime of Profits
These investing strategies are the perfect way to weather any market.
After all, Money Morning's track record is impeccable.
The companies we've shared with our readers have climbed 146% in seven months, 161% in 12 months, and 288% in 10 months… and our longer plays have risen more than 600% and even 1,300%!
And now, you'll get recommendations like these sent right to you every morning.
With your Money Morning membership, you'll always have a guide to making money. Our experts have over 400 years of combined experience, and the moment any one of them sees a new opportunity or a stock falls out of their favor, you'll be the first to know.
Just keep your eyes on your inbox for our daily messages on how you can make investing profitable.
And congratulations on starting your journey to wealth. We're glad to have you with us.