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What Apple Event Means for Apple Stock?

Posted on Tuesday, September 10th, 2019 by Chris Markoch

Apple is scheduled to announce the launch of new products. The headliner, as is usually the case, will be a new line of the company’s signature iPhone. The company is widely expected to release three new iPhones – the successors to the iPhone XS, XS Max and iPhone XR. Perhaps the only suspense is if the company will abandon its existing nomenclature yet again. The new phones may be branded the iPhone Pro.

The company is also expected to announce a new line of Apple watches. Not much is being leaked about any new features, leading some to believe that there may only be cosmetic changes to their Series 4 watch rather than a new version of the Series 5.

An intriguing new product is Apple Tags. These products will compete with products like Tile. They will provide Bluetooth tracking for items like keys, wallets, and cameras and be integrated into the Find My app.

Industry analysts are also eagerly awaiting the company to announce the official release of anticipated iOS updates for the iPadOS, macOS, watchOS, and tvOS.

Less likely will be a launch date for a refreshed iPad Pro and a 16-inch MacBook Pro. These products may hold off until an October event.

Once upon a time, Apple’s reveal of new hardware would be enough to send its stock soaring. This year, significant news may be coming from their Services business.

Apple is Building an Ecosystem

Apple is seeing exceptional growth in its Services business which includes Apple Music and has higher gross margins than its Products business. At the event, Apple is expected to provide information (i.e. price point and launch date) for two new services. Apple Arcade is the company’s soon-to-launch subscription gaming service. Apple TV+ is the company’s initial foray into the streaming market and will put it in close competition with fellow FAANG stock Netflix. Apple Arcade is rumored to begin at approximately the time the company’s new iPhone’s launch (around September 20). Apple TV+ is not expected to launch until November.

Analysts Want to See More from Apple

Analysts are already putting Apple under the microscope because of the effect that the trade war is having on Apple’s iPhone sales in China. However, Apple is confident that iPhone sales will pick up once the trade war with China is resolved. To that end, one of the most significant pieces of information expected to come out of the Apple event is the new iPhone price point.

However, over the last few years, the company has been purposefully positioning their company to be less dependent on its iconic product. For example, in Q2 2018 the company reported a 30% year-over-year increase in revenue from their wearables, home and accessories segment (Apple Watch, AirPods, Beats, etc.). Brad Moon, a leading financial blogger summarized the situation saying, “Apple is/was too reliant on a single product. Over the past few years, however, Apple has put more of its focus into improving its current products, widening its services and developing new technologies.” Moon concluded that as Apple evolves the whole of the company may be greater than the sum of any one part, including the iPhone.

Will Apple Stock Get a Lift From the Event?

In years past, Apple events have typically caused a sharp movement in the company’s stock – usually for the positive. This year, I’m expecting investors to largely shrug it off. The reason is 5G, or rather the lack of 5G.

Apple’s new iPhones will look aesthetically like the existing phones, but they will have new features. Most notably, it will feature one of the most significant camera changes in years, better waterproofing, and improved shatter resistance. There is also buzz surrounding the anticipated addition of reverse wireless charging. This would not only allow one iPhone to charge another, but it could also pair with other Apple devices like the Apple Watch or AirPods.

However, they will not be 5G phones. Those phones will not be available until 2020. Apple has already advised analyst that they are expecting to see softer demand for their iPhones throughout 2019. Apple products tend to have a cult following. But even these customers have their limit. These “early adopters” know that the 5G iPhones are coming in 2020 and I expect many customers will hold off until they launch in 2020.

This is not to say that I believe Apple is a bad stock to own. In my opinion, the new generation of 5G phones is coming and when they do in September 2020, I expect Apple’s shares to get a nice lift. Until then, it will be interesting to see how Apple continues to position itself for the upcoming 5G revolution. But investors hoping for a quick lift from a new product introduction may find themselves disappointed.

 

Companies Mentioned in This Article

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Apple (AAPL)$275.15flat1.12%23.14Buy$251.70
Netflix (NFLX)$298.50flatN/A111.38Buy$371.91

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