Launch Event Is Unlikely to Boost Apple Stock
Apple (NASDAQ:AAPL) stock is back to its highs. Resistance around $215 has held on a couple of occasions for Apple stock so far this year. AAPL bulls no doubt are hoping that this time, the stock can break through.
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One potential catalyst could be this week’s product event. It’s likely that Apple will release the new iPhone, although the company hasn’t confirmed that fact. A compelling launch coupled with growth in services and a still-cheap valuation could push — and keep — Apple stock past $215. All-time highs of $235 conceivably could be next.
But I’d be cautious in expecting too much, if anything, from this week’s launch. iPhone launches historically haven’t been great news for AAPL stock. The news this year very well could be underwhelming.
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To be sure, I remain skeptical toward Apple stock at these levels, and AAPL has defied that skepticism so far. It may do so again. But investors should at least be wary of the fact that history might repeat itself — and that would not be good news for Apple.
What to Expect on Tuesday
Apple historically has launched new iPhones in early September, which informs speculation that it will do so again this year. Right now, it appears likely that the iPhone 11 will be announced, along with two other models.
There may be additional news as well. Apple may have an update on Apple TV+, which was formally announced at a similar event back in March. iPad, Apple Watch, and MacBook models may be added to the list of product announcements.
What the Event Might Mean for Apple Stock
The obvious worry is that Apple’s event simply isn’t going to be all that newsworthy. A 5G model reportedly isn’t on the way until 2020. There may be some upgrades in terms of the camera or interface, but a transformative change to the iPhone simply isn’t going to be announced this week.
And so the risk is that the news — or lack thereof — only serves to highlight the long-running, hardware-focused concerns surrounding AAPL stock. The iPhone still drives over half of Apple revenue. It’s why the market only assigns a 17x forward price-to-earnings multiple to Apple shares.
“If this is just a better camera and apps and faster processor with no form factor change, what is Apple going to do?” Nucleus Research CEO Ian Campbell told CNBC. “I think it’s a tough moment for Apple and it’s going to be very carefully scripted.”
Outside of hardware, Apple doesn’t seem to have a game-changing announcement to make. Apple TV+ looks both thin and late. Netflix (NASDAQ:NFLX) already has dominating market share. Disney (NYSE:DIS), AT&T (NYSE:T), and Comcast (NASDAQ:CMCSA) are coming to market.
The Apple Watch still is a small contributor to revenue — and at this point has permanently dispatched Fitbit (NYSE:FIT). The iPad, laptops and desktops aren’t moving the needle either. It’s simply tough to see how Apple can get investors excited on Tuesday.
iPhone Launches Have Pressured AAPL Stock
There’s another factor to consider as well. In the past, AAPL stock often has struggled after iPhone launches. As I detailed a year ago, shares fell sharply in 2012, 2015 and 2016 either immediately ahead of or after the launch. That pattern repeated last year as well: Apple stock went from an all-time high in September to a two-year low in December.
Obviously, market movements were a key factor last year (and on occasion in the past as well). And it may be that lower expectations this time around suggest less downside for the stock.
But last year’s launch wasn’t supposed to be a big deal, either. Yet it created another “sell the news” event for AAPL. If history repeats, particularly with Apple stock at the highs (and resistance), the fourth quarter of 2019 could be as tough as the fourth quarter of 2018.
As of this writing, Vince Martin has no positions in any securities mentioned.
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