Apple is still riding high after adding more than $160 billion to its market cap since the beginning of August, a sum that vaulted the once-bankrupt consumer-tech giant past the $1 trillion valuation mark, cementing its status as the world’s most valuable publicly-traded firm. So, with its eye firmly fixated on the prize, the company is reportedly preparing to unveil its latest batch of three new iPhone models that, according to Bloomberg, will represent the most expensive offerings that the company has ever introduced. And when Apple CEO Tim Cook takes the stage on Wednesday for the company’s annual product launch, analysts will already be looking ahead to the year-end holiday sales season.
While smartphone sales increased by a meager 2% last quarter, analysts widely expect that Apple, which commands an army of dedicated consumers, won’t disappoint, as Deutsche Bank’s Jim Reid humorously explains.
Today is the day where every year I wake up completely happy with my current phone but go to bed completely dissatisfied with it and the day I have to justify to my wife why I need a new phone while realising after listening to myself that I don’t. However, since having children this conversation has gotten easier as the camera usually gets ever so slightly better each year and I can persuade my wife that the photos of the kids will be enhanced. So yes, it’s the annual Apple iPhone launch day. Given their status as the world’s biggest company it does matter for markets as well as for personal curiosities. They’ve added $160bn of market cap since the start of August which to put in some context that amount would equate to the 35th biggest S&P 500 company and the 13th biggest STOXX 600 company.
Looking back to Apple’s latest earnings report could provide some insight on the company’s strategy going forward. While iPhone sales, historically one of the company’s most important metrics, declined, Apple still managed to beat on both the top- and bottom lines, largely thanks to the $1,000 price tag of the Apple X, which was, at the time, the most expensive phone the company had ever released. This allowed the company to reap higher profits even as unit sales disappointed.
Analysts believe the company probably recognizes that it has reached a level of saturation that will be difficult to surpass (which explains reports from earlier this year about cutbacks in supplies), meaning that instead of focusing on the number of units shifted, the company will focus on wringing every last cent of profit from each phone it sells. Because of this, the pricing of the new products will be a much as – if not more – of a focus than their specs, as the Seattle Times reminds us, with prices on the most expensive model exceeding $1,000.
The iPhone X, a dramatically redesigned model released last fall, got rid of the home button and introduced facial-recognition technology to unlock the device. It was the first mass-market smartphone to demand a $1,000 starting price. Although the iPhone X didn’t fulfill analysts’ lofty sales expectations, it fared well enough for Apple to up the ante with the bigger model, whose price is expected to unveil Wednesday.
Apple also is expected to release an iPhone with minor updates to last year’s $1,000 model and another version made of cheaper materials, including a 6.1-inch LCD screen. Even so, the cheaper iPhone is still expected to sell for $650 to $750. The cheaper phone also is expected to lose the home button. Price cuts for older models, with the home button, are also likely.
By making more expensive iPhones, Apple has been able to boost its profits despite waning demand as people upgrade phones less frequently. IPhones fetched an average price of $724 during the April-June period, a nearly 20 percent increase from a year earlier.
The names for the new phones haven’t been released, though Apple is widely expected to offer two updated versions of last year’s iPhone X that will carry the moniker “iPhone Xs”. The third model is expected to be a successor to last year’s iPhone 8.
Here’s a rundown of what’s known about the new models, courtesy of Bloomberg.
There will be a trio of new smartphone models that look and act like the iPhone X from last year:
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And here’s more from BBG:
The focus will be on Apple’s latest iPhones. It’s still the company’s most-important product, generating about two-thirds of revenue and spurring purchases of other Apple devices, along with services like app subscriptions, movie downloads, and iCloud storage. While smartphone market growth has slowed, higher prices have helped Apple keep expanding and it has gained market share.
What’s more, by releasing the phones nearer to the date of the event instead of waiting until November, the company is hoping that a boost in holiday sales will continue to power its stock higher when the company reports earnings.
But phones won’t be the sole focus of Wednesday’s event: analysts will be closely watching the company’s unveiling of the latest generation of Apple Watches, which are expected to be the most significant updates since 2014. According to the Seattle Times, Apple could unveil a new generation of the smartwatch on Wednesday. Analyst Ming-Chi Kuo told CNN he expects the watch faces will have larger screens. We may also see edge-to-edge displays, much like the design of the iPhone X. It’s worth noting that photos of the new watch, tentatively titled the Apple Watch 4, as well as pictures of one of the new phones, leaked last month on 9to5 Mac.
While the iPhones will be the Wednesday’s main attraction, Apple’s growing smartwatch business will see stage time, too. The company plans to introduce new Apple Watches with larger screens that go nearly edge-to-edge, showing the user more information. The upgrades will mark the most-significant changes to the Apple Watch since the product was launched in 2014.
Apple had 17 percent of the smartwatch market in the second quarter of 2018 with 4.7 million units shipped, beating out second place Xiaomi Corp. by half a million units and Fitbit Inc. by 2 million, according to data from IDC. The Apple Watch saw more than 38 percent year-over-year growth, according to IDC.
The leaked pictures can be seen below:
Despite rumors of production cutbacks at some of Apple’s biggest suppliers, the company beat expectations last quarter for both the top- and bottom-lines when it published its latest batch of earnings, sending the stock to what were then all-time highs.
But even if consumers refuse to agree with Warren Buffett about Apple’s products being “enormously underpriced”, investors still have plenty of reason to stay bullish. After all, global ETF demand combined with a buyback-driven shrinking float (which will artificially inflate earnings), Apple will almost certainly leverage its giant cash pile to buttress the share price no matter the cost.
Anybody hoping to watch the event live can find the feed on Apple’s website, though you’ll need an iPhone, iPod, or iPod Touch with Safari on iOS 10 or later. To watch on your desktop, you must use a Mac with Safari on macOS Sierra 10.12 or later, or a PC with Windows 10 and Microsoft Edge.
The event begins at 10 am Pacific Time (or 1 pm ET).