September is coming, which means many things to many people. It is the month when young people fully get back to school, and when football returns in America. But for tech investors, September is most notable because it is the month when Apple (AAPL) typically unveils new iPhone models. Over time, as interest in these events has increased, speculation about what to expect from them has grown, but so has the accuracy of the forecasts. It is hard to keep a secret among thousands when millions want to know it. Thus, articles such as this one at macrumors.com, offer detailed analysis of what changes to expect when the new version of the world’s most successful electronic device are released, and they are rarely far off the mark.
You might think that with such usually accurate predictions out there for weeks, if not months, before the announcement of any actual changes, the impact of an upcoming launch on Apple stock would be minimal, but that hasn’t been the case. AAPL’s Septembers have followed a pattern for a while, with the stock dropping throughout the month, then bouncing back strongly shortly after. Sometimes, of course, there are strong macro factors that have distorted that pattern, but it has been pretty reliable, nonetheless.
The above is a five year chart for AAPL, with each candle representing a month. As you can see, AAPL has declined in four out of the last five Septembers. Sometimes that weakness has run into early October, but before too long, it has always bounced back.
There are logical reasons for that. Whenever a launch approaches, initial excitement about the new product almost always gives way to skepticism. Analysts and traders start to ask themselves how just a few tweaks can possibly prompt a surge in sales, and worries about pricing start to take over the collective narrative. That often carries through to the actual launch. Then, once the phone is released and rumors and anecdotal evidence about sales numbers emerge, it becomes clear that the new phone is selling well and the stock bounces back.
The thing is, small tweaks to design and features have been Apple’s business model for decades. The brilliance of the company is that despite that, they have been able to consistently create demand for updated models. In part that is because of great marketing, but it is also a function of the way most people buy their phones. They don’t pay for the phones up front, but rather, they pay over a couple of years, then update once those payments are over. They always have a payment, and in that context, adding a few bucks a month to their bill doesn’t seem like a bad deal for even small updates and slightly improved features.
Those features aren’t usually “innovation” as such. They tend to be Apple’s version of others’ innovations. This time around, for example, there are strong rumors that the new iPhone will include a telescopic camera lens for better zoom and close-up photography, something that Samsung first offered a decade ago in the Galaxy S4 Zoom. That was an unwieldy phone/camera hybrid that wasn’t massively successful, and Samsung has refined the technology and styling over the last ten years. Despite that, Samsung never caught up with Apple in terms of popularity. Now, the technology is at the point where Apple feels they can offer a sleeker, better version. If history is our guide, the ten-year old idea will be greeted as “revolutionary” when Apple uses it, and will become the next visible must-have iPhone feature.
I am not being critical here. Copying but improving the technology of others is a tried and tested business model, and it is something that Apple has done better than most for twenty years or so. The performance of the stock over that time is what matters to me, and that is impressive. The S&P 500 has gained just over 400% over the last two decades, while AAPL is up close to 45,000% in the dame period. Say what you like about Apple artificially creating demand or using technology developed by others, those numbers speak for themselves.
So, when AAPL starts to fall as the launch approaches, as history suggests it will, know that it is a buying opportunity, not a warning. It is what has typically happened at this time of year. The cynics have been telling us for years that “This time is different. This time will be the beginning of the end for AAPL!” They have been wrong up until now, and they will be again.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Image and article originally from www.nasdaq.com. Read the original article here.