Unveiling of Apple’s new products
The latest iterations of the iPhone, Apple Watch, and AirPods are widely expected to be unveiled.
However, key questions remain, most notably those concerning supply chain issues and pricing.
Shares of the company are up slightly more than 12% this year, and while the stock does not typically trade higher following the event, many analysts still see upside this year.
Here’s what analysts are saying about Apple’s Tuesday afternoon event:
According to Morgan Stanley’s Katy Huberty, the success of the latest iPhone will ultimately be determined by demand.
“Investor expectations remain muted, creating a compelling setup for the fall if early iPhone 13 data points outperform expectations,” she wrote.
If demand data outperforms expectations, shares may rerate higher “due to both positive estimate revisions and multiple expansion,” she added.
In a recent note to clients, JPMorgan’s Samik Chatterjee stated that the stock is better positioned than investors believe.
Chatterjee believes that once pricing is known, investors and consumers will be more confident in the stock.
“We estimate that not only are we on track for a record year for iPhone shipments in 2021E, but we are also on track for a record year for Upgraders,” he said.
At the investment firm Baird, the sentiment was similar.
“While upgrade cycles have lengthened, we anticipate that the addition of 5G will continue to drive a healthy upgrade opportunity over the next several years,” said analyst Will Power.
However, Harsh Kumar of Piper Sandler said that recent survey results show a surprising lack of interest in the iPhone 13.
Nonetheless, the firm was not ready to abandon the stock or change its overweight rating.
Kumar sees the iPhone 13 as “more of the same, but with 5G pushing demand.”
According to Bernstein analyst Toni Sacconaghi, the new Apple products are likely to be “evolutionary,” and the firm is remaining cautious.
“Given its relatively high valuation vs. history, and our belief that consensus estimates for FY 22 may be too high,” Sacconaghi said, “we see current risk-reward on the AAPL as neutral to modestly negative.”
Goldman Sachs has assigned a neutral rating to the company.
“As we prepare for Apple’s likely announcement of new products this week, we offer a few investor thoughts. Although we do not anticipate significant price changes, we believe the iPhone and Watch pricing will be the most interesting financial takeaway from the event. In terms of products, we anticipate an incremental iPhone update year with changes to notch size, camera, and battery life. We anticipate a more significant update to Apple Watch including a form factor update as well as more material new features.”
Bernstein has a market perform rating.
“Overall, the new iPhones will most likely be evolutionary in nature, with incremental improvements to the camera, processor, and battery. Given the remarkable accuracy of online blogs in recent years, we anticipate few surprises at the event. Given its relatively high valuation relative to history, and our belief that consensus estimates for FY 22 may be too high, we see the AAPL’s current risk-reward as neutral to slightly negative… We remind investors that Apple’s stock has historically outperformed in the 1-to-6 month period preceding Apple’s annual iPhone product announcement, but has shown mixed performance in the days preceding the event as well as in the 1-to-6 months following.”
Baird has an outperform rating.
“Our most recent U.S. consumer survey indicates that the iPhone upgrade opportunity remains strong, with results broadly consistent with previous surveys. Importantly, the survey continues to highlight the ecosystem’s power, including encouraging interest in a potential future Apple Car.
JPMorgan has an overweight rating.
“We continue to see AAPL shares set up for multiple catalysts into the end of this year, including not only the upcoming iPhone 13 launch, but also low investor expectations for iPhone and total revenue in FY22, driven by concerns about cycling past the peak upgrade cycle associated with 5G…”
We estimate that not only are we on track for a record year for iPhone shipments in 2021E, but we are also on track for a record year for Upgraders.”
Bank of America – Rating: Neutral
“The majority of the iPhone 13 feature set is known for this event, and in our opinion, iPhone pricing is the most important variable, followed by launch timing and cadence, and any news on bundling. Given the inflationary environment, Apple may raise ASP (average selling prices) for iPhones, which may not have a negative impact on demand given buy-now/pay-later and installment plans.”
Overweight rating for Piper Sandler
“We recently polled 1,000 Americans, and only 6% intend to purchase/upgrade to the iPhone 13′′.
this autumn/winter We were taken aback by the lack of enthusiasm for the upcoming iPhone launch… Given the popularity of the iPhone 12 and the still-largely untapped 5G install base, we expect the iPhone 13 to maintain momentum, even if the features are mostly similar to the iPhone 12…..iPhone 13 More of the Same, but 5G Pushes Demand.”
Wedbush has an outperform rating.
“Taking a step back, Apple is still in the midst of its most successful overall product cycle in nearly a decade. Our Asia supply chain checks for the second half of the year continue to place iPhone builds between 130M and 150M. The iPhone 13 appears to represent 35-45 percent of iPhone builds in Q3, giving us increased confidence in the iPhone 13 product cycle for Cupertino and Street numbers in the coming quarters.”
Morgan Stanley has assigned an Overweight rating to the company.
“Investor expectations remain muted, creating a compelling setup for the fall if early iPhone 13 data points outperform expectations…”
Citi has a Buy rating.
“Investors will also be watching to see if Apple will stick with their current pricing structure or pass on higher component costs to customers.”
According to investor discussions, expectations for iPhone dollar sales following the 40% increase in FY21E are fairly low, with many expecting a sharp decline in FY22E, similar to what happened after the launch of the iPhone 6 and iPhone X.”
How the iPhone event could influence Apple stock price
Analysts predict that the company will release new iPhones as well as updates to its AirPods and Apple Watch.
According to Bernstein’s analysis, Apple’s relative performance to the S&P500 before and after iPhone product announcements from 2007 to 2020:
In the months and weeks leading up to the iPhone event, Apple shares outperform the market on average. Apple’s stock typically performs 0.2 percent worse than the market on the day of the announcement and one week later. Shares have historically gained 0.3 percent more than the S&P500 in the month and three months following the announcement. Six months after the announcement, the stock averages a 5.9 percent higher return than the market.
The same pattern is repeating itself.
“We remind investors that Apple’s stock has traditionally outperformed in the 1-to-6 month period preceding Apple’s annual iPhone product announcement, but has exhibited mixed performance in the immediate days preceding the event, as well as in the 1-to-6 months following the event,” Bernstein analyst Toni Sacconaghi wrote in a note.
The outcomes differ from year to year. According to Bernstein, Apple’s stock underperformed the market by 15% six months after the company’s 2018 iPhone XS/R event, then outperformed the S&P500 by 34% the following year with the iPhone 11 announcement.
Apple’s stock closed slightly higher on Monday, ahead of the event. In 2021, the stock is up 12.8 percent, compared to the S&P500′s 13.3 percent gain this year.
