How Top Analysts Are Reacting to Apple’s iPhone Release
Just as Wall Street expected, Apple Inc. (AAPL– Get Report) unveiled its newest iPhone on September 10 sending shares up 1.2%. However, what did catch some investors off guard was the phone’s price tag. The tech giant cut the price of its least expensive model, with the iPhone 11 starting at $699. This is $50 less than the current iPhone XR’s price. AAPL’s newest online services also start at a lower cost than previously expected.
According to TipRanks’ Trending Stocks, AAPL is trending the most out of any other stock in the consumer goods segment after its product launch. The tool is able to pinpoint which stocks have received the most analyst ratings in the last three days, with it able to filter the results by sector, market cap as well as the recommendation type.
With this in mind, we wanted to see what the Street’s top analysts had to say about AAPL’s latest iPhone release.
Let’s take a closer look.
What’s all the Buzz About?
It was widely expected that the tech giant would launch its newest iPhone at its September 2019 Keynote, just as it has done every fall since 2011. In addition to the price drop, the new phones, available for pre-order starting September 13, will feature longer-lasting batteries, improved cameras as well as faster chips.
While these upgrades are important, they are by no means revolutionary. The significant takeaway from the event was the price point. While its new “Pro” models will still start at $999 and $1099, the same price as its equivalent prior-year models, the iPhone 11 price cut is surprising as AAPL raised the price from 2017 to 2018.
The company also announced that the cost of its new streaming service, Apple TV+, will be significantly less than both Disney+ (DIS) and Netflix (NFLX). The service, which is slated to launch on November 1, boasts a $4.99 per month price tag. Apple Arcade, its subscription gaming service, will also start at only $4.99.
At the event, the company also unveiled its updated Series 5 smart watch. The revamped watch features an always-on display and will start at $399, with AAPL keeping its current series 3 watch starting at $199. Its 7th generation iPad is priced at $329.
What Does This Mean for AAPL?
It’s no secret that iPhone sales have experienced a slowdown thanks to maturation of the smartphone replacement cycle. It should be noted that this is expected to change when 5G capabilities are added to the phones, but this won’t happen until at least 2020.
As a result, investors have been left wondering if a price drop and upgrades will be enough to entice customers to buy new iPhones.
Nomura’s Jeff Kvaal doesn’t think so, calling the iPhone 11 launch “marginally disappointing”. “While investors may be tempted to look beyond the iPhone 11 cycle towards the more meaningful iPhone 12 upgrade, pitfalls remain in Apple's fiscal Q1,” he explained. Based on this, the four-star analyst reiterated his Hold rating and $185 average price target on September 11. He sees 15% downside potential for the stock.
However, Piper Jaffray analyst Michael Olson disagrees as he believes that the lower iPhone price could give Apple a way to reach new customers, hooking them into its system of connected products. As a result, the five-star analyst reiterated his Buy rating and $243 price target on September 10. The price target reflects his confidence in AAPL’s potential to surge 12% over the next twelve months.
Another top analyst, Daniel Ives, believes its streaming service rather than its phones could fuel major upside for the company. “The pricing of Apple’s streaming TV service at $4.99 per month is a showstopper and a major shot across the bow at the likes of Netflix and Disney, among others,” the Wedbush analyst explained. Based on this development, he kept his Buy rating and $245 price target. The four-star analyst believes shares could gain 13% in the next year.
The Consensus is…
All in all, Wall Street remains bullish on AAPL. 16 Buy ratings vs 11 Hold and 2 Sells received in the last three months add up to a ‘Moderate Buy’ analyst consensus. Its $224 average price target indicates 3% upside potential.
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