Apple AAPL is expected to wait until 2020 to unveil an iPhone with 5G connectivity, per Bloomberg.
The Cupertino-based company, which initially planned to launch a 5G supported iPhone by 2019, is likely to delay the launch due to unavailability of Intel’s INTC 5G-enabled chips. Notably, after a legal dispute over royalty payments with Qualcomm QCOM, Apple chose Intel’s 5G chips for its iPhones.
Following the news, shares of Apple decreased 4.4% to close at $176.69 on Dec 4. Year to date, the company has gained 4.1% compared with the industry’s rally of 9.6%.
We believe the delay may not bode well for Apple as other major phone providers like Samsung, Oppo and Huawei Technologies are gearing up to launch their 5G phones in 2019. Moreover, in terms of shipment (second-quarter 2018), Apple has lost its position to Huawei, which became the second largest smartphone seller after Samsung, per Gartner.
Additionally, a recent Wall Street Journal report stated that Apple lowered production orders for recently released models in September and October this year. Lower-than-expected demand for iPhones coupled with Apple’s decision to introduce more models is likely the reason behind the production cuts.
However, Apple is shifting toward a high margin business model by including more services to its portfolio.
Apple Inc. Revenue (TTM)
Apple Inc. Revenue (TTM) | Apple Inc. Quote
Services to Boost Apple’s Top Line
Apple’s Services segment has emerged as the new cash cow as the company is slowly reducing its hardware dependence.
Apple is expanding its footprint in augmented reality (AR) through acquisitions, especially in wearables. Additionally, the company is looking to unveil its AR headset or device by 2020. We believe this will further aid the company’s financials, which crossed the $10 billion mark in revenues from wearables over the trailing four quarters.
Apple is also aggressively penetrating the healthcare market. The iPhone maker continues to partner with several health care communities enabling its users to easily access their medical records. Moreover, Apple's HealthKit allows third-party apps like Garmin Connect, Nike+ Run Club and others to contribute data to Apple Health. Further, the robust Apple Watch wearable series is gaining traction due to advanced fitness tracking technology.
Moreover, Apple’s push into the streaming market by acquiring/partnering with Oscar winning content makers and targeting unique and appealing content is expected to help it take on the likes of Netflix NFLX and Amazon AMZN.
Apple currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
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