iPhone 14: ‘Worst Kept Secret'

Investors hoping that the introduction of the iPhone 14 series will help Apple Inc. shares rebound to their January record may be in for a disappointment if history is any guide.

Some analysts predict Apple will raise prices on its higher-end iPhone 14 Pro models that cater to a more affluent customer base while lowering older phones to lure budget-conscious buyers. (AFP)

Investors hoping that the introduction of the iPhone 14 series will help Apple Inc. shares rebound to their January record may be in for a disappointment if history is any guide.

The stock has fallen seven times on the day the company has launched a model in the past decade. When it announces the new iPhone Wednesday, Apple is likely to take shareholder-friendly steps such as higher prices to cushion its margins from inflationary pressures, analysts say. Such moves, though, come during a weakening economy that may make buyers reluctant to pay more for a handset.

“Apple's fall iPhone launch event has always been the ‘worst kept secret,' with investors aware of most of the product lineup to be announced heading into the event,” Samik Chatterjee, an analyst at JPMorgan Chase & Co., wrote in a note. “Investors will be keenly watching iPhone prices in the backdrop of an increasingly challenging macro with concerns around consumer spending.”

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Historically, the shares tend to rebound a couple months after the event, as early sales figures trickle in. However, even that respite has evaded the stock after the last two iPhone announcements. Apple's shares are down 13% this year, heading for their first annual decline since 2018.

Some analysts predict Apple will raise prices on its higher-end Pro models that cater to a more affluent customer base while lowering older phones to lure budget-conscious buyers.

Wamsi Mohan, an analyst at Bank of America Corp., expects to see a 20-cent bump in earnings per share if Apple hikes prices of its Pro models by $50.

Price increases are important because Wall Street is counting on Apple's growth in earnings per share to outpace the increase in revenue. Analysts project that earnings will increase by 9% in 2022 and by 6% next year, compared to projections for annual sales increases of 7% this year and 5% next, according to data compiled by Bloomberg.

Apple is the top performing mega-cap technology stock this year because investors have faith in its ability to tap into its more than 1 billion customers to earn more on its services including apps, video, fitness and gaming subscriptions.

The next catalyst for the stock will be earnings for the September quarter, to be reported in late October, said Gene Munster, managing partner of Loup Ventures.

“At that time I expect Apple will reassure investors that while Apple is not immune to a slowdown, their products remain in demand and sales will grow year over year in the December quarter,” he said.

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