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Apple’s (NASDAQ:AAPL) nearly 90-minute “Wonderlust” event brought mixed reviews from analysts.
The biggest surprise was the fact that the device maker did not raise U.S. prices, despite expectations to the contrary.
“One striking exception is that despite a weaker yuan, which would point to Apple potentially raising prices, Apple retained its prices in China, possibly reflecting concerns about a weaker consumer and rising political backlash,” Bernstein, which has a Market Perform rating on the stock, wrote in a note.
But Credit Suisse, which has an Outperform rating on the stock, says recent media reports regarding Chinese government prohibitions on iPhones in the office are overblown, noting that the rules have been in place since 2017.
Apple (AAPL) on Tuesday unveiled the next generation of Apple Watch that doesn’t require touching the screen to operate, as well as the new iPhone 15 lineup. The Apple Watch Series 9 with silicon was redesigned on the inside with a new S9 chip. Series 9 includes “double tap,” using fingers to operate the watch without actually touching the screen.
The new iPhone 15, which comes in two different sizes, includes the “Dynamic Island,” an interface that was exclusive to the iPhone 14 Pro and Pro Max and lets users see alerts at the top of the screen.
The company spent a lengthy amount of time boasting about its environmental actions including presenting a skit featuring actress Octavia Spencer as Mother Nature.
Pricing
Citi, which has a Buy on the shares, noted that the unchanged pricing “could help lift units in a tough macro environment.”
“We maintain our investment thesis that Apple is more focused on maximizing gross profit per unit of iPhone from migration to premium phones as favorable commodity prices on iPhone storage and iCloud related services will likely help offset flat pricing,” Citi said.
UBS, however, had a different view. Prices were lifted for Pro models by $100. The firm estimated that 40% to 50% of iPhone sold after launch are Pro models, which could result in a 4% to 5% revenue tailwind, however, because of a softer environment and rising component costs, margins could be squeezed.
UBS, which has a Neutral rating on AAPL, noted that sell-through data has been trending below its 49M forecast suggesting September quarter units of 47M.
“Although our F2023 EPS is largely unchanged, we reduce our F2024/25/26 EPS by 2% on average to reflect lower ASP on iPhone and a modest headwind to iPhone units in China,” UBS said.
Bernstein said margin implications for the iPhone 15 versus the 14 model are “tougher to gage and are predicated largely on Pro mix.” The firm modeled phone sales flat in 2024, below the consensus of 5% growth, citing uncertainty in the consumer spending environment, lack of compelling new iPhone functionality and “continued digestion from strong iPhone 11/12 cycles.”
Canaccord was more positive on the event.
“The company met investor expectations and has a strong lineup to deliver healthy holiday sales,” Canacord said. “Apple is well positioned to benefit from the 5G upgrade cycle, and we anticipate solid overall growth trends as 5G smartphones ramp and its installed base expands with higher- margin services revenue.”
“Longer term, we expect the higher-margin services revenue growth to outpace total company growth and drive gross margin expansion,” Canaccord, which has a Buy rating on the stock, said.
“With its strong balance sheet, management plans to continue to repurchase shares given the attractive valuation and plans to get to cash neutral longer term. With strong ongoing sales to a loyal customer base and a continued mix shift toward high-margin services, we reiterate our BUY rating and $205 PT.”
Keybanc, which has an Overweight on shares, saw the event as “a modest negative for AAPL given a lack of expected price increase for the Pro model, features that lack a compelling motivation for consumers to upgrade, and modestly less aggressive promotions from carriers.”
