Despite an overall decline in stocks on Friday, with all three major averages ending in negative territory, shares of Apple (AAPL) bucked the trend, rising as the iPhone 15 officially went on sale on Friday. Apple stock closed on Friday at $174.79, rising 0.49%. The shares have outperformed the market this year, rising 34.5% year to date, besting the 12.5% rise in the S&P 500 index.
However, like many of its mega-cap tech peers, Apple shares have traded sideways to slightly down over the past month as investors grapple over more interest rate hikes from the Fed which continues its battle against the rising cost of living.
But the highly-anticipated launch of iPhone 15 could reverse the decline in Apple’s stock. While the iPhone, which was first launched in 2007, continues to generate the lion’s share of the company’s revenue, unit sales has been on the decline over the past three quarters. The iPhone 15, particularly the Pro and Pro Max models, are expected to revive unit growth, according to Wedbush Securities analyst Dan Ives. Citing strong demand for the aforementioned models, Ives rates Apple stock as Outperform with a $240 price target.
The iPhone 15 Pro and Pro Max are still “very strong,” with long lines seen in China, Europe and the U.S., Ives wrote in a note to clients. “The big focus of consumers at the Midtown Apple Store today [Friday] has been Pro Max so far as we believe a scarcity of iPhone 15 Pro Max is starting to build throughout the supply chain.” Citing what he calls “eye-popping” promotions from carriers such as Verizon (VZ), T-Mobile (TMUS) and AT&T (T), Ives noted that iPhone 15 pre-orders are higher than he and most of Wall Street analysts expected.
Factoring Ives’ $240 price target on Apple, that assumes additional premiums of close to 40% from current levels. The iPhone 15 could ship 85 million units and perhaps as many as 90 million, according to Ives. With the third quarter due to end in six days, the question is whether the iPhone 15 can generate that level of demand through the holiday shopping season. Some are already referring to the iPhone 15 as a little computer, given that the phone can be connected to a 4K monitor via the USB-C port that displaced the proprietary “Lightning” charging technology port on previous iPhone models.
For consumers, the change to USB-C port offers some benefit. For example, the former lightning port offered a transfer speed of only 480 Mbps, while the iPhone 15’s new cable offer speeds of 10Gbps for faster charging. What’s more, in addition to a 48-megapixel wide-angle camera, enhanced battery life and performance, and enhancements that include the new A17 chipset, the iPhone 15 runs on a chip based on Taiwan Semiconductor’s (TSM) 3nm process technology and supports hardware-accelerated ray tracing.
Meanwhile, the pricier Pro Max sports a 5-6x optical zoom lens which for photography enthusiasts is a standout feature. Given these advanced features and technologies, I expect the iPhone 15 and 15 Pro to revive unit shipments for Apple, and thus resume the company’s revenue growth in fiscal 2024. Apple will report fourth quarter earnings results in mid-to-late October. For the quarter that ends September, earnings are expected to be $1.39 per share, while revenue it expected to be $89.22 billion., down 1% year over year.
Meanwhile, full year 2023 earnings of $6.07 per share and revenue of $383.11 billion will be down 0.65% and 2.8%, respectively. Despite the expected decline, Apple stock should rise as the year closes with the iPhone 15 creating a ‘mini super cycle’ driving higher-than-expected revenue in 2024.
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