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What Apple’s 5G iPhone means for consumers, competition

On Tuesday, Apple announced their plans to roll out numerous new products, including multiple versions of the new iPhone 12. CFRA Research Senior Analyst Angelo Zino joins The Final Round panel to break down why Apple’s 5G iPhone 12 may show the largest unit growth since the iPhone 6.

Video Transcript

SEANA SMITH: All right, well, let's get to one of those big tech stories of the day. And that, of course, is Apple. Shares, though, today closing off in the red, just off around 2 and 1/2%. But we did get some big news, and it is the news that we have been waiting for now for quite some time.

The tech giant rolling out four new iPhone 12 models, all of which support that faster 5G network. And for more on that, we want to bring in Angelo Zino. He's a senior research analyst at CFRA.

And Angelo, great to have you back on the show. Like I mentioned, we were waiting for this for quite some time, lots to talk about when this would exactly happen. Now we got it, stocks in the red. I guess, first, just, what did you think of this announcement? Did it live up to your expectations?

ANGELO ZINO: Well, I think, you know, first off, the reason I think this thing's sold off into the red is clearly, it kind of had a buy the rumor yesterday and kind of sell off on the news. Very typical Apple type of performance, you know, with these type of events.

And that being said, you know, as far as the event is concerned, I mean, you kind of alluded to the point that they announced four new iPhones at significantly different price points, starting at the $699 price point, all the way up to $1,100.

At the end of the day, I mean, it had what you expected it to have-- 5G capabilities, OLED screens across all their different pricing points, and a more powerful A14 processor. Nothing really kind of surprising investors out there.

And, you know, that being said, you know, a big reason why it's kind of the most noteworthy thing to us is the fact that they did sustain the price point. We were a little worried that they maybe wouldn't, especially-- and the fact that they did it amid this pandemic I think is a big sign.

And I think that the fact that they punched so much into the camera capabilities, among other things, I think will really kind of gravitate to investors out there or consumers.

SEANA SMITH: Yeah, Angelo, it's interesting because when we talk about getting consumers' attention, I think the big question going into this is what exactly 5G means for the average customer, for the average consumer. And this was addressed towards the end of the presentation. But do you think that that is going to be the thing that consumers can get excited about and get them off the couch and to get them to upgrade their phone?

ANGELO ZINO: So when we kind of look at Apple here and their-- kind of their iPhone launch here in recent years, the last two cycles have definitely kind of been, you know, fairly lackluster in nature. So when we kind of look at, you know, the 5G potential here over the next two years, most consumers hold on to their phone these days about three to four years.

So that being said, I think what 5G will do is it will allow more consumers to kind of upgrade and actually go directly through Apple, rather than potentially, let's say, buy secondhand via somebody else.

So I think what you'll see is definitely an imprint on the average selling price side of things, as they buy kind of these higher priced devices, rather than maybe an iPhone 8 or 10 or 11 or what have you. So it shouldn't help that side of things.

But yes, I mean, we do think it will help kind of improve the replacement cycles here over the next two years. But that being said, longer term, 5G really isn't going to be the-- won't really be what kind of gets this stock moving higher.

INES FERRE: Hey, Angelo, Ines here. What do you make of Apple's HomePod Mini device, the smart speaker for $99? Apple in the race of smart speakers hasn't really been in the forefront too much. It's been really behind more of Amazon and Google. Will this help it in that race?

ANGELO ZINO: Yeah, I know. You know, that being said, you know, when we kind of look at this, definitely love the price $99. We think it's going to be a great Christmas gift out there. We think they're going to be able to sell a lot of units.

When you kind of look at that wearables business here, it's really kind of been driven by two products, the Watch, as well as kind of, you know, AirPods. We think this could be a nice third product here.

We were a little bit disappointed with the fact that they didn't announce those over ear headphones. But that being said, I think this could be a very good product-- a very good sell kind of going into that holiday selling season.

I mean, clearly, it's not going to do-- you know, when you have a price point relative to the Echo out there with Amazon, I mean, it doesn't even compare. But $99 for, you know, that ecosystem of consumers out there, I think they hit it right.

RICK NEWMAN: Hey, Angelo, Rick Newman here. Once 5G phones are on the market, does Apple have the opportunity to get more service revenue or recurring revenue from things you can do on a 5G phone than things you can do on the current phones?

ANGELO ZINO: Well, I think kind of the knock on 5G relative to 4G is, you know, 5G really doesn't give you much, at least in our view, of what you can do relative to 4G. I mean, especially given the fact that from a network perspective, [INAUDIBLE] out there won't have that access to 5G here over the next 12 to 24 months. So from that side of things, I mean, I think there's really limited potential in terms of, you know, upsell in terms of the services side of things.

Where we remain very optimistic about and excited about in terms of the services side of the things is the fact that we do think over the next kind of 18 to 24 months, Apple does kind of lump in more of an as a service-- hardware as a service offering. And, you know, it's something that wasn't announced last month, but I think kind of the bundling opportunities that they announced last month, kind of is a start to something a lot bigger.

And I think kind of a year to two years from now, you're going to see them lump the bundles that they announced last month with more of kind of that as a service hardware offering. And I think that really helps the recurring revenue model of Apple longer term. And I think that's really what kind of continues to allow potential multiple expansion over time, or at least allow them to sustain the multiples that you're seeing in the stock today.