Apple: It’s Go Time

September 9, 2019 3oliver

It is that time of year again. The second week of September can be named “iPhone week” as it has become the time where technology giant Apple (AAPL) unveils its newest smartphones. On Tuesday, the company is holding a major event where we are likely to see a number of new announcements. While I discussed a few major questions to ask last month, there have been some developments since that are worth diving into.

The highlight of the show will certainly be the new set of iPhones, perhaps to be the “11” line. While I won’t cover every expectation we’ve seen already, you can do that here, we are going to see updates to last year’s three versions. Other than the usual upgrade to the chipset and perhaps some new colors, the big thing expected is major camera changes. The XR successor is reportedly getting a dual-camera rear setup, while the two updated versions of the XS are supposed to get a three camera rear setup.

The biggest question for many has been in regards to pricing, given last year’s raise for the entry level pushed away some consumers. Given the new camera setups, plus the XR successor perhaps getting a boost to 4 GB of RAM memory, I don’t believe all those rumors of it being a “budget device”. I think we’ll still see the entry level model come in at $749. As a reminder, here is what the lineup looked like last year, after older models received their usual discounts with the launch of the new models.

Even though there were some hopes last week of a potential US / China meeting in October, the trade war is still progressing. New tariffs went into effect on September 1st, which are likely to impact the Apple Watch and AirPods. Tariffs could impact the iPhone in the US if no deal is reached by December, but that shouldn’t have too much of an impact this week. I will also be interested to see product pricing for China, given the dollar’s rally against the Yuan over the last month as seen below.

(Source: cnbc.com, real-time quote seen here)

Although the Apple Watch and AirPods have been huge growth drivers for revenues in recent years, I could see a scenario where the company eats the tariffs. Why raise prices when global economies are starting to slow? Even if there is a little bit of a margin impact, it’s not like we are talking about a tariff on the iPhone just yet. That issue might be one to debate in a few months. Management would likely earn some goodwill with consumers if it keeps pricing the same, especially after what happened last year with the iPhone. It’s a big year for the Apple Watch, now that the App Store has come, and you don’t need a paired smartphone.

Former Apple leader Steve Jobs was known for “one more thing”, a surprise announcement that usually came at the end of the event. A month ago, I would have said that a second generation of the HomePod was perhaps that likely add-on, but recent news has changed my opinion. There have been rumors of an update to Apple TV, and with the company set to launch its streaming and gaming services this fall, I think we could see a major update to this product. The timeline fits since the last three versions were launched in 2013, 2015, and 2017. There are some out there that believe the TV update might be part of the “regular” event this week, and they are hoping for something else big to be the one more thing, like AR glasses or some other surprise.

Interestingly enough, the iPhone event day has not been a good one for Apple shares in recent years. As the table below shows, the stock has declined during each of the last 7 iPhone announcement days. Perhaps expectations are just too high going in, and the day becomes a “buy the rumor, sell the news” event. The overall average is a decline of 0.95%, but if we exclude the SE day, the average September event sees an average loss of 1.10%. Apple shares have rallied recently into the event, so another decline could be possible.

(Source: Announcement dates from respective iPhone wikipedia pages, seen here, with price data taken from Yahoo! Finance)

For technology giant Apple, the start of the holiday season rush comes this week as the company gets set to launch its latest series of iPhones. The major draw this year will be major upgrades to the camera setups, which hopefully won’t mean another price raise. New Apple Watches are also expected, with perhaps an Apple TV update as the company gets ready to launch its streaming services this fall. After the 2018 iPhone series saw its sales disappoint, investors are looking to see if things can rebound this year, or if weakness will continue as consumers wait for next year’s major 5G iPhone launch. With Apple shares just a stone’s throw from their all-time high, investors are betting that this holiday period will be much better than last year’s was.

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