Apple is the best FAANG stock right now, this investor says

The tech sector has taken its lumps over the past while but it’s still a great place to invest, says Wedbush managing director Dan Ives, who has Apple (Apple Stock Quote, Chart, News NASDAQ:AAPL) as a top pick.

Stocks are rallying on Monday after a handful of trading days that saw well-known tech names like Microsoft (Microsoft Stock Quote, Chart, News NASDAQ:MSFT), Amazon (Amazon Stock Quote, Chart, News NASDAQ:AMZN) and Apple pull back in double digits.

Microsoft and Amazon each dropped 12 per cent from their early September highs, while Apple, fresh off a four-for-one stock split in late August is now down 13 per cent since September 2.

But Ives says those losses should be seen as a reasonable reaction by the market to the strong gains tech stocks have seen over the first eight months of 2020, and rather than an indication that the tech run is finished, Ives sees more upside to tech names big and small.

“My view is it’s a healthy pullback. I still think it’s sort of the sixth or seventh inning in this tech rally and we believe tech stocks are still going to go 20 to 25 per cent higher in the next six to nine months,” said Ives, speaking on BNN Bloomberg on Friday.

“The valuations obviously got to a point where you started to get priced-to-perfection. You saw with some of these numbers, especially on some of the core growth names like Slack and [work-from-home stocks] that these stocks sold off, but in my opinion, the appetite for the secular growth story continues to be there. It’s a rereading in tech stocks, and that’s why my view is that it’s a green light to own tech despite this white knuckle week or two that we’ve seen,” Ives said.

In the case of Apple, a lot of speculation is flying around how well the next generation iPhone will sell when it’s released in October. Apple, which will deliver updated versions of the iPad and Apple Watch at an Apple event on Tuesday, has reportedly called for its iPhone manufacturers to make 75 to 80 million of the new 5G-enabled iPhones for sale in October.

But Ives argues that this fall’s iPhone release promises to be a huge deal for the company and for the stock.

“You’re going to have a once-in-a-decade iPhone supercycle with the iPhone 12 and 5G,” Ives said. “These are all the numbers you need to know and just forget everything else: 350 million of 950 million iPhones worldwide are in a window of an upgrade opportunity, they have not upgraded phones for three and a half years. That's why it’s a supercycle.”

“With 5G and a rereading on services, I view this is the golden buying opportunity in Apple, and I love the haters to hate and drag the stock down just like we saw in March.” Ives said. “It just creates opportunities. Longer term this continues to be our favourite FAANG name.”