AAPL: Better Buy: Apple, Tesla or Facebook?

Tesla- A modern-day Thomas Edison
Facebook- Security and anti-trust issues ahead
Apple- China, and dominance in 2020

Three of the most closely watched stocks throughout 2019 were Tesla (TSLA), Apple (APPL), and Facebook (FB). All of the shares posted impressive gains between the end of 2018 and Friday, December 27. Meanwhile, the overall price action in the stock market during the fourth quarter of 2018 was the complete opposite of 2019. Q4 2019 has been a period where today’s highs were mostly the next day’s lows in the equity arena.

As we head into a new year and the third decade of the century, Tesla, Apple, and Facebook face unique opportunities and challenges. Each company has been a disruptive force and has achieved incredible success. Elon Musk, Tim Cook, and Mark Zuckerberg will each have to be on their respective games in 2020 to reach goals and avoid the many pitfalls that lay in front of their companies.

Tesla- A modern-day Thomas Edison

Elon Musk is a character, no question. He is far from a typical CEO. However, the founder of Tesla is a modern-day Thomas Edison. He is also one of the most innovative leaders in the world. He has translated his vision of electric cars into the leading manufacturer. His other companies include SpaceX and The Boring Company.

Tesla is the crown jewel in the founder’s portfolio, and after consecutive quarters where the company delivered earnings disappointments, it turned the corner in Q3. The market had expected Tesla to lose 42 cents per share. When it achieved a profit of $1.86, the stock soared.

3 STOCKS TO DOUBLE THIS YEAR

(Source: Barchart)

The chart shows that TSLA shares closed 2018 at $332.80, and at $430.38 on December 27, it was over 29% higher on the year. According to Yahoo Finance, a survey of 30 analysts have an average share price of only $298.33 per share, well below the current level. Cash burn is an issue that continues to face Tesla. However, the range of price targets is vast, with a low at only $44.52 and a high at $733.90 per share. TSLA is a cult stock. Those who believe that Mr. Musk is a modern-day eccentric Edison are the bulls, and I am in that camp going into 2020.

Facebook- Security and anti-trust issues ahead

Facebook’s (FB) earnings in 2019 were a bumpy road. After beating analyst estimates by 19 cents per share in Q4 2018, the company missed the consensus numbers by 78 cents in Q1 and 97 cents per share in Q2. In Q3, the company got back on track and beat the estimates by 21 cents per share. FB closed at $208.10 per share on December 27. A survey of 48 analysts on Yahoo Finance expects the shares to move to an average of $238.48, with a broad range between $120 and $342.

(Source: Barchart)

FB shares climbed from $131.09 at the end of 2018 to $208.10 last Friday, a rise of 58.75%. The social media company exploded higher but remained below its record high at $218.62 in July 2018.

As FB shares are approaching the high, regulatory issues and the potential for a government-directed breakup of the company make the future a challenge for the company. The company’s desire to roll out a digital currency product, Libra, has also put Facebook in the crosshairs of officials in Washington, DC. The odds of another 58-plus percent gain in FB in 2020 are low. The regulatory landscape and uncertainty of the coming election in the US make FB a risky investment in the coming year.

Apple- China, and dominance in 2020

The company Steve Jobs founded and left in the capable hands of Tim Cook is an American jewel. Aramco may be the world’s largest publicly traded company after an IPO that valued it at $1.7 trillion. Still, Apple’s (AAPL) $1.3 trillion valuation at a share price of $289.80 on December 27 has been an innovative earnings machine for investors. APPL closed the last decade at $30.10 per share in December 2009. The stock has been almost a ten-bagger in ten years, after rising from $3.67 in 1999 to $30.10 at the end of 2009.

Apple is a company that does a great job managing analyst expectations. It beat earnings estimates by between one and 19 cents over the past four quarters. A survey of 41 analysts on Yahoo Finance has an average price target of $266.22 per share as of the end of last week. The range was from $150 to $350 per share.

Apple products are ubiquitous, and their innovation historic. When it comes to Mr. Cook, his relationships around the world transcend politics. His ability to forge a connection with US President Trump even when most CEOs have shunned the President has given Cook a seat at the table when it comes to the critical trade negotiations with China.

(Source: Barchart)

The chart dating back to 1984 says it all. After an 83.7% gain in 2019 as of December 27, betting against Apple has not been wise in the past and is not likely to be in the future.

For my money, I prefer APPL going into the coming year, as it is the ultimate franchise. TSLA is a speculative stock but call me a member of the Musk cult. When it comes to FB, the privacy and regulatory issues make it the most dangerous of the three.

AAPL shares were trading at $292.27 per share on Tuesday afternoon, up $0.75 (+0.26%). Year-to-date, AAPL has gained 88.07%, versus a 30.77% rise in the benchmark S&P 500 index during the same period.

About the Author: Andrew Hecht

Andy spent nearly 35 years on Wall Street and is a sought-after commodity and futures trader, an options expert and analyst. In addition to working with StockNews, he is a top ranked author on Seeking Alpha. Learn more about Andy’s background, along with links to his most recent articles. More...