Why this FAANG stock can rally nearly 50%
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Tech stocks are making a comeback after a massive sell-off in the first half of the year. But tech investor Gene Munster thinks one FAANG stock could trade even higher — despite already having rallied nearly 10% over the past month. “I believe Apple will reach $250 [per share] in the next couple of years,” Munster, managing partner at tech-centered hedge fund Loup Ventures, told CNBC’s ” Street Signs Asia ” on Thursday. Nevertheless, Munster said the stock could still go lower before heading higher. “The stock has simply been a rocket ship and I think that there is room for it to have some variation. I think it can, and should, have a pullback. I put that under the context of trading,” he said. Apple has emerged relatively unscathed from this year’s bear market run. The stock has lost about 8% of its value this year, beating its peers within the FAANG grouping as well as the tech-heavy Nasdaq Composite . But Munster is unfazed by the stock’s near-term volatility. He’s an investor, not a trader, he said. “What’s more important with a business is how it can trend over the next two to five years,” he said. ‘Growth problem’ As a big company, Apple — which is expected to achieve $400 billion in revenue next year — has a “growth problem,” according to Munster. So how can it grow further? “The answer is — you go for big markets and those big markets are things that investors get excited about.” “Why I think this [stock] goes to $250 is that you have the foundation of the iPhone, but it’s what’s on the horizon, whether it’s healthcare, whether it’s augmented reality … but they could do something in automotive that could be even bigger,” he said. He noted that Apple has announced partnerships with a slew of automakers, such as Land Rover, Mercedes , Porsche , Volvo and Honda , to update Car Play in late 2023 — a development that Munster described as “pretty dramatic.” “These partners underscore a simple fact: legacy auto needs Apple.” Read more JPMorgan says the growth stocks rally has further to go — and explains when it will likely end ‘Don’t be a hero’: Investment pro reveals how to play the market, names the stocks she’s buying How to reduce risk in your portfolio right now, according to the pros Munster believes Apple could even compete with automakers by introducing a car. “It’s a massive, $2.5 trillion annual market. The smartphone market is about $1 trillion a year. The car could be bigger than the iPhone,” Munster said. “When you put these together. I get much more confident about the $250 outlook,” he added. But Munster’s excitement about the stock also stems from how its products are so intertwined with our daily lives. He noted that 70% of Apple’s revenue is related to products that are “necessities,” citing the iPhone as an example of a product that has become “a fabric in our lives.” Supply chain risks But Munster warned that Apple is not without its risks. Its biggest risk? China. “If you look at Apple compared to other large tech companies that are based in the U.S., it clearly has the most relative exposure to China,” he said. He estimates that the company derives 18% of its revenue and manufactures 60% of its products in China. But Apple has been looking to diversify its exposure, and is reportedly in talks to make some products in Vietnam, according to Munster. It will also spend about $17 billion annually to bring tech production back to the United States, he added. Shares in Apple closed down 2.3% lower at around $168 on Monday, representing a potential upside of 48.8% to Munster’s price target.
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