Apple has named the product launch on September 15 “Time Flies” - suggesting the Apple Watch will be the main event - not a delayed iPhone 12.
Keen Apple fans (or shareholders!) can watch the event streamed live on YouTube on Tuesday 10am PDT.
Apple has not said which products will be previewed on Tuesday so there is still a chance for a surprise iPhone appearance. The uncertainty over which products will be featured provides a possible opportunity for traders. A surprise debut for the iPhone 12 would presumably be positive for the stock but since few are expecting it, disappointment should be limited if it doesn’t happen.
Chief Financial Officer Luca Maestri told analysts on July 30 that the latest iPhone would be available “a few weeks later” than last year when they started selling in September because of coronavirus-related supply chain issues. Apple’s US employees have mostly been working from home since March. That’s not to say a September launch couldn’t happen before iPhones go on sale slightly later.
iPhone 12
Since it appears the new iPhone won’t be announced yet, we won’t linger on this. But why is the new iPhone launch a big deal?
1. The iPhone is Apple’s biggest revenue generator and the centre of its ecosystem, making it important for earnings forecasts
2. This will be the first 5G-enable iPhone, which could usher in a new upgrade cycle and at least temporarily reverse the trend of people holding onto their devices for longer.
3. iPhone launches increase share price volatility due to the excitement and/or disappointment surrounding the new product
The table below from BoA Merrill Lynch shows how Apple stock has performed before and after an iPhone launches prior to the 11.
Next Big thing?
The iPhone is getting less important over time. Last quarter 44% of Apple’s revenues came from iPhones. Five years earlier in 2015 it was 64%.
The two segments of non-iPhone revenue that are perhaps not the ‘next big thing’ but are growing is wearables and services. The Watch is the flag-bearer for the wearables and the possibility of new bundled services is probably the thing that has Wall Street most excited.
Apple Watch
The Apple Watch Series 6 will likely become even more geared towards health tracking. According to Apple research website 9to5 Mac, the latest iOS code suggests improved electrocardiogram readings and blood-oxygen detection.
Apple ‘One’ service bundles
Earlier in the summer Bloomberg reported that Apple would bundle its Apple Music and TV+ services into a basic bundle with two other advanced bundles possible including Apple Arcade, Apple News+ and iCloud storage among other things.
Ever since Amazon launched Prime, Wall Street has been waiting for Apple to do something similar to tie together some of its main offerings to create a reoccurring revenue stream. Apple One bundles is an evolution of the ‘iPhone Upgrade Program’ where users can pay to have the option to upgrade the handset ever year. The end-game could be the iPhone upgrade incorporated into the bundles.
iPad Air
iPad sales leaped during the pandemic and people had to make a sudden shift to working and teaching their children from home. The expectation is that Apple will launch an update to the iPad Air with thinner bezels and USB-C connectivity and possibly a touch ID. Working-from-home has added a new lease of life to the iPad.
Over-ear headphones
Apple has yet to fully integrate the ‘Beats’ headphone style into its products after having bought the company from Dr Dre and Jimmy Lovine in 2014. Some expect it could launch a new wireless bluetooth headphone that pauses music playing when you take them off, like AirPods do.
A rare pre-event stock dip
Apple shares vs. S&P 500 (year-to-date)
(source: FlowBank / TradingView)
A well-established pattern (though not always true) has been a product-rumour driven run-up in the stock price before an Apple event and a drop back afterwards with the release unable to live up to lofty expectations.
The SoftBank / retail call options-induced August-September roller coaster ride in tech stocks has created a rare pre-event dip in Apple shares. Though it has to be said that dip comes after a furious 2020 rally that leaves the shares up over 50% year to date.
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