The implications of Apple’s new iPhone 13 introduction for the company’s stock

The implications of Apple’s new iPhone 13 introduction for the company’s stock


With the iPhone 13 set to be unveiled at Apple’s forthcoming “California Streaming” event on September 14, the anticipation for the tech giant’s next line of premium handsets is building. However, according to a recent poll, the majority of iPhone owners would not upgrade to the newest model.

Only 10% of iPhone owners plan to upgrade to the iPhone 13 when it comes, while another 26% are undecided about making the leap. Several reported enhancements coming in Apple’s new iPhone might affect their choice.

The majority of iPhone users want to remain with their current model, with 31% of those who do not intend to purchase the iPhone 13 stating that nothing will convince them to do so at this moment. Even though the iPhone 12 is only a year old, it is still one of the greatest smartphones available. There are several compelling arguments for sticking with Apple’s present model.

iPhone 12 owners who are prepared to wait for Apple’s forthcoming flagship smartphone may be making the correct decision, as reports claim that the iPhone 14 will include much-anticipated updates. Information about the 2022 iPhone is already leaking a year before its release.

At the conclusion of the 80-minute event, Apple CEO Tim Cook stated, “What a spectacular set of announcements.” Investors, on the other hand, were underwhelmed. Apple’s shares dropped 1% to settle at 148.12 on the stock exchange.

The event was threatening to be overshadowed by a federal court judgment declaring Apple’s App Store regulations anti-competitive. On the following Friday, Apple’s shares dropped 3.3 percent. It increased 0.4 percent to 149.55 on Monday.

The latest iteration of Apple’s annual autumn product announcement event was, on the surface, a yawner. There were few shocks; the new iPhone 13 range met expectations, while updates to iPads and the Apple Watch were merely incremental. But dig in a little bit and there’s much to munch on. The most important conclusion is that Apple’s prospects are better than naysayers on Wall Street expect.

Apple’s pricing approach, according to Bernstein analyst Toni Sacconaghi, is meant to maintain a pattern of raising iPhones’ average selling prices or ASPs. Apple’s ASPs are expected to rise 18 percent year over year in the September 2021 fiscal year, according to him. He claims that the iPhone ASP topped $880 early this year, the highest since the phone’s debut in 2008.

Consumer desire for higher-end Pro and Pro Max versions, which he claims have margins 10 percentage points greater than non-Pro models, is driving the trend, at least among iPhone 12 fans. Sacconaghi predicts that if the new lineup’s iPhone sales mix is similar to that of the iPhone 12, the average selling prices would rise by 5%.

Katy Huberty of Morgan Stanley is concerned about the new phones’ profitability as well as their cost. She believes that Apple’s plan to boost iPhone profits by raising average pricing is the major news, but she also points out that intense carrier discounts and trade-in offers to enhance affordability and should keep demand strong. Huberty points out that AT&T (T) and Verizon (VZ) are promoting the iPhone 13 more aggressively than they did the iPhone 12, owing to their need to move traffic to 5G networks after spending huge amounts of money on the spectrum and speedier equipment.

According to Kyle McNealy of Jefferies, carrier promotions were the most important news last week. Qualifying consumers may get the basic iPhone 13 model for free from AT&T, Verizon, and T-Mobile US (TMUS). AT&T will provide you with a complimentary Pro. T-Mobile will give you a free iPhone 13 Pro Max if you trade in an iPhone 12 Pro Max. Apple aims to build its user base, increase consumer loyalty, and extend its offerings. Carriers want to promote 5G. Consumers will benefit from improved phones. It’s a win-win-win situation.

Huberty points out that 5G is only used by around 5% of the iPhone user base; she anticipates an “elongated” 5G development phase, which will keep demand for new phones high. In a research statement, she adds, “Should early reports indicate elevated iPhone demand versus low buy-side expectations, we’d expect Apple shares to outperform in the near-term.”

The eventual slowdown of Apple’s growth rate will be one of the most challenging aspects of the narrative for buyers. Revenue growth is expected to slow from 34% in fiscal 2021 to around 4% in fiscal 2022, according to Wall Street projections. However, if iPhone demand remains strong, backed by 5G carrier support, sales growth might be even greater. Gene Munster, the co-founder of Loup Ventures and a former Apple analyst, believes growth will be closer to 10%. Keep in mind that pre-pandemic (and pre-5G) Apple sales were down 2% year over year in fiscal 2019, with iPhone sales down 5%. Munster believes the price may rise to $200 per share, a third higher than it is now.

However, there were a few small setbacks. Some investors had anticipated a more proactive strategy to stock repurchases, and they were disappointed to see that Cisco does not expect operating leverage, with earnings projected to rise in lockstep with revenue. This reflects greater component costs as a result of shortages, as well as a desire to invest in development. Cisco CEO Chuck Robbins estimates that the firm’s addressable market is worth $400 billion, with another $500 billion in industries that the company doesn’t now serve. M&A activity is expected to increase.