The stock can weather another so-so product launch
Apple shares continue to have a better 2019 than the overall market. That’s despite Wall Street’s apparently subdued response to what’s known about to the $967.9bn group’s new product line-up that will be launched at 6 PM UK time and 10 PM U.S. Pacific Time. Judging by analyst commentary, Apple launch events aren’t what they used to be. Indeed, the set piece of Tuesday’s occasion will, as usual, be a new iPhone model, but the handset is unlikely to boast much of the ‘innovation’ ethos Apple hints at in media handouts.
Analysts and tech reporters have also been underwhelmed by the new handset’s probable lack of 5G facilities. Professional Apple mavens, who manage to track data from known supply chains say their best guess is that a phone model capable supporting the faster fifth-generation cellular network technology won’t be retail-ready before 2020. As such Apple would be breaking with a tradition of pushing out substantial iPhone feature upgrades every other year if its latest one has ‘merely’ has modifications that lift the latest handsets right up to the cutting edge.
In the past, such lukewarm sentiment going into a big launch would be a bad omen for Apple shares, but AAPL is outperforming the S&P 500’s 18% rise so far this year by an additional 17%. This may partly reflect that broader anticipation—i.e., ‘Main Street’—doesn’t seem as disinterested as market professionals. Google search terms may still be telling, if not scientific. The graphic below shows the results of an ‘Interest over time’ search for Apple’s iPhone X, released in 2017 and the ‘iPhone 11’, the name that’s being widely used for the handset’s latest iteration. Google’s ‘Interest over time’ methodology dispenses with absolute values and shows peaks and troughs of search term usage over the search period. Searches covered all of 2017 for ‘iPhone X’ and 2019 to date for ‘iPhone 11’. As such, according to Google, interest in the iPhone 11 looks to be at a higher intensity than iPhone X saw by this time in 2017.
‘Interest-over-time’ search-word comparison: ‘iPhone X’ (2017, blue) and iPhone 11 (year to date, red)
At the very least it’s probable that this time, a so-so set of iPhone feature upgrades may be neutral for Apple shares. Apple’s pricing conundrum is also less of a pinch point for investors than before. The stock has largely recovered from deep corrections linked to lower demand. Those were partly triggered by massive price-point gaps between old and new iPhone models. With investor expectations duly lowered and Apple having discovered the level at which price inelasticity ends, big hikes aren’t expected this time round.
Still, given that this article, like everything else you may have read about the new launches, is based on leaks, speculation and other forms of hearsay, the chance of big surprises remains. In that case, logically, the stock’s slight dip at the time of writing ought to be transformed into an advance if new features of the new iPhone or other products surprise strongly on the upside. For now, below are the main expectations.
- Apple’s new camera iPhone 11: Widely leaked designs place the focus of the major changes on the camera. All three of them, on the new top-end handset. The trio on the back are meant to improve wide-angle shots, resolution and video recording. Also expect the latest in auto-correct capabilities, live video editing and probably much more. Face ID is also slated for upgrade
- Harder, Better, Faster, Stronger: The last term might be least arguable. Reports indicate that iPhone 11 has been tested far more cruelly than its predecessors, with drops from higher heights and blows of harder ferocity. In other words, these glass phones may be more shatter-resistant and shock resistant than the average phone
- Three new iPhones: This custom is reportedly set to continue. Reporting months ago, the Wall Street Journal stated that a ‘budget’ iPhone XR successor, a mid-range option and a luxury-end supersize version were all in the offing. Given that the iPhone XR’s replacement is supposed to get a new camera too, it looks like Apple is attempting not to skimp on upgrades across the new models, though features are still likely to vary. Certainly ‘XR 2019’ is likely to sport the new Apple-designed A13 processor, just like the options
- Other hardware: With Apple Watch having impressive changes last year, it’s likelier the focus there will be on software rather than hardware, though activity at makers of Apple’s casings has suggested to some observers that ceramic and titanium surfaces are on the cards too. Talk is much vaguer about possible changes to other well-known Apple products, like iPad, Macs, and Apple TV. For both tablet and laptops, it might not be the right month. The group has held separate, lower-key events in October in recent years. With the launch of Apple Arcade looming and a new push into streaming video production, a revitalised set-top box (Apple TV) would be cogent
- Services: Apple wants to be known as much as if not more for the cool stuff which runs on its consumer products, which it broadly calls services. Including app store, music, and health and more, services is the group’s second-fastest growing segment after all
A solid year of gains—amid typical AAPL volatility—sets a promising scene for the medium-term share price outlook. Yet resistance between $221-$222 is becoming persistent. The shares topped there in November 2018 and in May and July this year. Taking the tip of the upward spike on 1st May of $215 as a low, that price and the region all the way up to $222 can be seen as problematic. It is in effect protecting resistance not much higher at $233.5, Apple’s record-peak last October. Amid neutral momentum, according to the Relative Strength Index, the strict bias at this point in time may not be that bullish. Persistent failure at current prices is likely to impel the shares to trend back towards the rising trend line beneath most lows since 3rd June. If that breaks, the aggressive defence of $192.60 on 5th August, implies support there, before sellers turn their eyes to $170.
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Source: City Index
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