Apple's share price fell after the announcement of the highly anticipated iPhone 15. We find out what are some key investor concerns that have prevented the stock from reaching its previous high.
Many excited Apple fans were queuing to get their hands on the latest product at the iPhone 15 launch on 22 September.
Indeed, Apple has revolutionized the smartphone world (and our world) since the launch of its first generation iPhone in 2007.
Fast forward to 2023, Apple has enabled our lives with IMac, Apple TV, Apple Music, Airpods.
Apple’s share price has done well with a positive return of more than 50% year-to-date. However, the share price of Apple fell slightly after the iPhone 15 launch.
Let us dive deeper to find out if Apple is still a good stock to own.
What you need to know about Apple’s share price
#1 - Lower-end iPhone 15 more popular than higher end one
First, we take a look at the demand and sales of iPhone following its launch by looking at global delivery lead times.
The lower-end iPhone 15 appears to be more popular, as it currently takes about 15 days on average for the entry level phone to be delivered upon order, similar to when it was just launched in September.
However, delivery lead time for 15 Pro Max has declined to 35 days from 54 days in end September, suggesting weak demand.
Compared to the iPhone 14 range, the iPhone 15 has a slightly longer lead time of 15 days compared to 2 days for the iPhone 14.
On the other hand, the iPhone 15 Pro Max has a shorter lead time of 35 days compared to 41 days for the iPhone 14 Pro Max.
This suggests that more consumers are buying the lower end iPhone 15 range, as compared to the iPhone 14 range.
This may be seen by some investors as bad news for Apple as they typically make a higher profit from the higher-end phones.
#2 Apple might be impacted by rising geopolitical tensions
Recently, it was reported that China has placed restrictions on some government agencies on the use of iPhone for work purposes, citing security concerns.
It is important to note that the restrictions have not been verified or confirmed but the international media headlines have led to concerns among investors about the potential impact on Apple’s prospects.
China is an important market for Apple, accounting for 19% of its total revenue in 2022. It has also been contributing to Apple’s growth.
#3 – Apple is entrenching its ecosystem with services
Fortunately, Apple is no longer a hardware company about smartphones, watches and tablets.
The company now has a sizeable Services revenue segment which includes the following income streams:
- Advertising – Apple’s own advertising platforms
- Applecare – Fee based services and technical support for repair and replacement under AppleCare
- Digital Content – Digital content subscription-based services such as Apple Music, Apple News+ and Apple TV+
- Payment Services – Payment Services including Apple Card, a co-branded credit card as well as cashless payment, Apple Pay
Apple has extended its business from selling devices to different subscription-based services.
Services revenue has been growing strongly in the past few years.
It has grown from $32.7 billion in 2017 to $78.2 billion in 2022, and now makes up about 20% of Apple’s total revenue.
Apple has been able to leverage on the iPhone to expand its offerings to music, digital entertainment, financial payments.
In doing so, Apple is moving beyond being just a smartphone company into a multi-segment consumer technology company with a unique product and service ecosystem.
What would Beansprout do?
In the short term, Apple is facing potentially short term issues such as weaker higher-end iPhone 15 sales.
In addition, Apple has to navigate delicately in its important growth market with rising geopolitical tensions.
For now, most Wall Street analysts are positive on Apple according to Webull data.
Close to 70% of analysts have a Strong Buy or a Buy recommendation on Apple, with an average share price target of $197 as of 13 November 2023.
This would be 6% above its current share price of $186 as of 13 October 2023.
As Apple creates a strong ecosystem of products and services, the growth in its loyal customers might might be supportive for its outlook in the long term.
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