iPhone 15 reveal: How will Apple Stock react?

Synopsis:
Apple is set to dazzle with its iPhone reveal on 12th September 2023. The tech giant reported an impressive $383.93 billion in revenue in 2023. Innovations, particularly in Siri, highlight Apple's forward momentum. The company's future looks promising for investors and tech enthusiasts alike..

12th September 2023 will be a big day of the year for Apple and Tim Cook. It is the launch of the annual iPhone, a long-standing Apple tradition. Historically, Apple's launches have been nothing short of spectacular in terms of technological advancements and market impact. For instance, Apple's stock rose by 3% within a week of the iPhone 14 launch.

Will history repeat itself in the case of iPhone 15 this year?

Are you familiar with the investment strategy 'buy the rumour, sell the news'?

This approach involves buying stocks anticipating a positive event, such as a product launch, and then selling them once the event occurs.

Apple's share price after its launch

Since its first launch, the stock has ended higher on just four launch occasions since 2007.

Apple has been so synonymous with innovation that even a product many times better than its predecessor is not enough to satisfy shareholders. So, when Apple cannot deliver another revolutionary product, the effect is seen in its stock price.

Seeing the stock price drop causes panic, and more people sell, causing the price to fall further on the launch day.

For example, in the iPhone 13 and 13 Pro series launched in September 2021

At the end of the launch day, the stock price fell by 0.96%.

The stock for the iPhone 12 series fell by 2.65% in 2020.

The launch of the iPhone X series resulted in a fall of 1.21% in September 2018.

The exact trend dates to most of its launches since 2007.

Only four launches since the first iPhone saw an upward trend in the stock price.

Let us talk about the long term

The anticipation leading up to the event, the reactions post-launch, and the sales figures all play a role in influencing the stock price.

The chart shows that Apple's stock has generally seen an uptick leading towards the launch, with a slight dip post-launch, only to recover and often surpass previous highs once sales figures are announced. This can be viewed in Chart 1.

Returns by Apple vs. S&P 500

In the year-to-date period, AAPL achieved a 41.38% return, significantly higher than the return of 18.36% in SPY.

Over the past ten years, AAPL has outperformed SPY with an annualised return of 28.02%, while SPY has yielded a comparatively lower 12.54% annualised return.

The chart below displays the growth of a $10,000 investment in both assets, with all prices adjusted for splits and dividends.

AAPL vs. SPY - Performance Comparison

Breaking down company basics

Free cash flow can be defined as a measure of financial performance calculated as operating cash flow minus capital expenditures.

Apple Free Cash Flow 2010-2023 | AAPL

iPhone is still the main cash cow of Apple and contributes to 50% of Apple's revenue. Launch events will thus still be critical for the growth of the iPhone Apple.

The Revenue Rollercoaster

Apple's revenue journey is nothing short of a blockbuster movie. Starting as a garage startup, Apple has transformed into a trillion-dollar behemoth.

Apple Revenue 2010-2023 | AAPL

Apple reported a revenue of $383.93 billion in 2023, marking a 5- 7% increase from 2019.

The iPhone Era: The introduction of the iPhone in 2007 marked a turning point. It wasn't just a product; it was a revolution. The subsequent years saw exponential revenue growth, with the iPhone becoming the cornerstone of Apple's financial success.

Diversification: While the iPhone remained a significant revenue driver, Apple began diversifying. The App Store, Apple Music, and services segment contributed significantly, showcasing Apple's ability to innovate and capture new markets.

Net Income: The Profit Powerhouse

Apple's net income is a testament to its operational efficiency and strategic prowess. While revenue showcases sales, net income reflects the company's ability to retain profit after all expenses.

Apple Net Income 2010-2023 | AAPL

The net income stood at $94.76 billion in 2023, reflecting a robust profit margin.

Margins Matter: Apple's ability to command premium pricing for its products, coupled with efficient supply chain management, has ensured high profit margins.

EPS Elevation - Shareholder's Delight:

Earnings Per Share (EPS) is a critical metric for investors. It represents the portion of a company's profit allocated to each outstanding share of common stock.

Apple EPS - Earnings per Share 2010-2023 | AAPL

The EPS for 2023 was $5.95, showcasing consistent growth over the years.

Buyback Boost: Apple's share buyback programs have driven EPS growth. By reducing the outstanding shares, Apple ensured each share got a larger profit pie.

Apple's continuous rollout of innovative products ensured that the company's earnings remained strong, positively impacting EPS.

The Future: Predicting the Financial Implication

While it's always tricky to predict the future, based on historical data and current market trends, we can make some educated estimations:

Sales Figures

The iPhone 15, given its innovative features, is expected to surpass previous sales records, leading to a potential surge in Apple's stock price in Q4 2023.

Competitive Landscape

As competitors scramble to match or beat the iPhone 15's features, we might see increased volatility in the tech stock sector.

Global Markets

With Apple expanding its reach in emerging markets, the international sales figures for the iPhone 15 could play a pivotal role in influencing stock prices.

Supply Chain Implications

The global chip shortage and supply chain disruptions could affect iPhone 15's production and delivery, potentially affecting Apple's stock.

Currency Fluctuations

With the US dollar fluctuations, international sales figures, when converted, could have varied impacts on Apple's financials.

Looking Ahead

Apple's continued investment in Research & Development (R&D) is crucial with the global tech landscape evolving rapidly. The company's foray into services, wearables, and potential ventures into augmented reality and electric vehicles could diversify its revenue streams and reduce its reliance on iPhone sales.

In addition, a report says Apple is stepping up its efforts to give its digital assistant Siri the ability to engage in natural dialogue with its users. The corporation reportedly spends millions of dollars daily on research and development of an internal language model known as Ajax.

The stock remains a focal point in the tech investment landscape. While the financials of the company are robust, its heavy reliance on the iPhone for revenue makes the success of each launch crucial. Investors should keep a close eye on Apple's diversification strategies and the reception of its new products in the market.

Trade with Century Financial in the Apple Stock.