What's Driving Apple's Stock To All-Time Highs?

Apple shares were trading above $236 Friday afternoon, building on the positive momentum seen for much of the year. The stock's previous peak was $233.47, hit on Oct. 3, 2018.

The stock shed about 6% in 2018, dragged down by poor reception to the iPhone 10 line-up launched in the year, the broader market downturn and simmering U.S.-China trade tensions.

Bad Start, But Good Going

Although it's been a good year for Cupertino, it didn't start well: Apple lowered its December quarter revenue guidance in early January, reducing its outlook for the first time in 20 years.

The stock lost about 10% in a single session Jan. 3 before taking off on a strong rally that was interrupted by a short downtrend that began in early May and lasted about a month through June 3.

For the year-to-date period, Apple gained about 48% through Oct. 10 versus the Nasdaq Composite's 29% advance and the S&P 500's 19% gain.

Source: Y Charts

See also: As Trade Talks Approach, "Barometer" Stocks Like Apple And Boeing Could Be In Focus

Headwinds Become Tailwinds

Trade Tensions De-Escalate

After remaining a thorn in the flesh for the market and the economy for about two years, signals of a likely resolution to the long-standing U.S.-China trade tensions are emerging.

High-level officials from both sides have are in talks, with President Donald Trump expressing hopes of a positive outcome.

Good things are happening at China Trade Talk Meeting. Warmer feelings than in recent past, more like the Old Days. I will be meeting with the Vice Premier today. All would like to see something significant happen!

— Donald J. Trump (@realDonaldTrump) October 11, 2019

The imposition of tariffs on Chinese imports and a potential retaliation by China would hurt Apple, as it counts China not only as a manufacturing base but also a significant market for its products.

Apple Redeems Itself With New iPhone Lineup

After a lukewarm reception to the iPhone 10 models in 2018, Apple seems to be regaining some momentum with respect to its flagship product.

"With the stronger-than-anticipated initial sales for the launch of this year's iPhone lineup, we believe the September quarter results could come in at the high end of guidance," Canaccord Genuity analyst Michael Walkley said in a recent note. 

JPMorgan analyst Samik Chatterjee also suggested Apple has the ability to drive upward revision to volume expectations.

" ... We believe the volume upside in 2019 will have significance in demonstrating that the firm can deliver balance of volume and profitability even in a tough backdrop," Chatterjee said.

The analyst raised the iPhone volume estimate for the fourth quarter by 1 million units and for the first quarter of 2020 by 3 million units.

Apple is transforming into a Services company, a move that's expected to cushion any potential downside stemming from product weakness.

Sell-Side Upbeat

As recently as Friday, Wedbush analyst Daniel Ives issued bullish commentary on Apple, basing his optimism on the upcoming Apple TV+ launch.

The analyst estimates the subscription numbers for the streaming services will touch 100 million in three to four years.

Wedbush raised the price target for Apple from $245 to $265.

Among 35 analysts covering the stock, 19 have Buy ratings on Apple shares, 13 Hold ratings and three Sell ratings, according to TipRanks.

The price targets for the stock range between $150 and $270.

Apple shares were advancing 2.65% to $236.15 at the time of publication, for a valuation of $1.07 trillion.

Related Link: Apple, Roku And More 'Fast Money' Picks For October 10

Photo by Daniel Lu via Wikimedia.