Apple phone event, ‘worst kept secret,’ is priced in

INVESTORS hoping that the introduction of a new line of iPhones will help Apple Inc shares rebound to their January record may be in for a disappointment if history is any guide.

The stock has fallen seven times on the day the company has launched a model in the past decade. When it announces the new iPhone on Wednesday, Apple is likely to take shareholder-friendly steps such as higher prices to cushion its margins from inflationary pressures, analysts say. Such moves, though, come during a weakening economy that may make buyers reluctant to pay more for a handset.

“Apple’s fall iPhone launch event has always been the ‘worst kept secret,’ with investors aware of most of the product lineup to be announced heading into the event,” Samik Chatterjee, an analyst at JPMorgan Chase & Co, wrote in a note. “Investors will be keenly watching iPhone prices in the backdrop of an increasingly challenging macro with concerns around consumer spending.”

Historically, the shares tend to rebound a couple months after the event, as early sales figures trickle in. However, even that respite has evaded the stock after the last two iPhone announcements. Apple’s shares are down 13% this year, heading for their first annual decline since 2018.

Some analysts predict Apple will raise prices on its higher-end Pro models that cater to a more affluent customer base while lowering older phones to lure budget-conscious buyers.

Wamsi Mohan, an analyst at Bank of America Corp., expects to see a 20-cent bump in earnings per share if Apple hikes prices of its Pro models by US$50.

Price increases are important because Wall Street is counting on Apple’s growth in earnings per share to outpace the increase in revenue. Analysts project that earnings will increase by 9% in 2022 and by 6% next year, compared to projections for annual sales increases of 7% this year and 5% next, according to data compiled by Bloomberg.

Apple is the top performing mega-cap technology stock this year because investors have faith in its ability to tap into its more than 1 billion customers to earn more on its services including apps, video, fitness and gaming subscriptions.

The next catalyst for the stock will be earnings for the September quarter, to be reported in late October, said Gene Munster, managing partner of Loup Ventures.

“At that time I expect Apple will reassure investors that while Apple is not immune to a slowdown, their products remain in demand and sales will grow year over year in the December quarter,” he said.

Tech Chart of the Day

Its been a rough year for technology stocks and that’s reflected in the 26% slump in the Nasdaq 100 Index. While the gauge is on course for its worst performance since 2008, it’s still outperforming another favorite of speculators, Bitcoin. The cryptocurrency is down almost 60% for the year, falling for the third consecutive day as it inches closer to its 2022 low. – BLOOMBERG