As usual, Apple (NASDAQ: AAPL) dropped significantly from nearly $ 175 a month ago highs after their annual iPhone launch piqued investor interest. The technology giant did not impress without a premiere mixed reality devices to compete with Metaplatforms (META). My investment thesis Bear remains on the stock exchange with another unsuccessful break of strong resistance at the last highs.
IPhone 14 Mixed Request Message
Influential analyst Ming-Chi Kuo says he is currently mistakenly predicting a price hike for iPhone 14 models, especially the Pro models. Just 12 days after the Far Out event, which launched the new iPhone, Apple would completely misdiagnose the need for each model in order to already shift production.
Apple would definitely benefit from a consumer buying the more expensive Pro models due to the price difference. The big question is whether consumers are actually buying the more expensive products and the economy is potentially in recession and definitely facing higher inflation.
The actual breakdown of starting prices for different versions of iPhone 14 is as follows:
- iPhone 14 – $ 799
- iPhone 14 Plus: $ 899
- iPhone 14 Pro: $ 999
- iPhone 14 Pro Max: $ 1,099
The data seems to suggest consumers are buying the iPhone 14 Pro models due to the limited value of the 14 Plus. The 14 Pro only costs $ 100 more than the Plus. Forbes it even argues for buying a refurbished iPhone 13 Pro Max at a discount for an iPhone 14 Plus.
The data doesn’t really question whether or not consumers are transitioning to the Pro versions, but it does question the volumes. A consumer looking to have a big screen smartphone can upgrade for another year when the best option starts at $ 1,000 for the base version.
Other reviews actually suggest consumers should buy the new iPhone 13 for just $ 699, cutting down on the money paid to Apple this cycle. IPhone 14 models can technically raise higher average selling prices due to the change in models they buy and the elimination of the mini, but the consumer has every reason to go for the cheaper option.
The 5G chip was the key to the launch of the iPhone 12. All the other improvements to the iPhone 13 and now 14 models are minor enhancements that consumers can take or walk away without much indigestion. However, the consumer does not want a new phone without a 5G chip that would leave the smartphone well behind network speed capabilities in the next few years. Few consumers really want a better camera, processor or emergency SOS function.
The latest news about a camera defect in the iPhone 14 Pro Max can quickly reach the audience. The Guardian reports owners see camera crash when using popular apps like Instagram and TikTok.
Aside from the unexpected persistent problem, Apple will no doubt solve any camera problems in a relatively short amount of time. The tech giant won’t see any long-term impact on sales, but this camera issue could impact sales over the holiday season as consumers try to shift their purchases towards Pro models.
What investors always miss
Investors need to understand that Apple analysts are equally stubborn, and these factors are factored into earnings estimates. The analyst community has 23 Buy ratings for the stock and only 1 Sell ratings.
Wedbush analyst Dan Ives has iPhone 14 demand or slightly exceeds iPhone 13 sales of ~ 220 million per year. As mentioned above, the only way for Apple to increase its sales is to move from the higher ASPs to the more expensive models, with the iPhone 14 prices being identical in the US to the 13 model and volumes starting at the same level.
With an ASP higher by $ 100, Apple could increase sales by $ 22 billion last year. This optimistic scenario would only increase iPhone sales by 10% from fiscal 22 levels, which should approach $ 210 billion after hitting $ 191 billion in fiscal 21.
Ironically, analysts predict that total sales for the full year 23 will grow by 5%, or just $ 19 billion. A more reasonable $ 50 increase in ASP value of $ 50 fits comfortably within these sales goals without the need for analysts to increase financial goals.
Dani Ives is even promoting a scenario where Apple fails to meet demand for the iPhone 14 Pro due to prices and reviews pushing people towards high-end models. Apple can easily spot a higher ASP and miss its sales targets due to a lack of critical deliveries.
Current iPhone 14 Pro shipping dates are already expiring in at least a month based on your selections. iPhone 14 Plus will arrive much faster.
The data suggests a divergence from demand for the iPhone model rather than any additional demand for an iPhone 14. Either way, investors should understand that Apple is unlikely to exceed analyst group consensus estimate above 80% bullish stock, despite the tech giant traders 23 times in the 23 fiscal year estimate after Apple fell $ 20 compared to recent highs.
The key lesson for investors is that the launch of the iPhone 14 was not at all crucial. Apple appears to be only going to increase revenues by pushing consumers to higher pricing models, without delivering convincing technology improvements to non-Pro models.
Investors need to understand that much of the expected ASP increases are already included in analysts’ estimates of FY23’s 5% revenue growth. Shares should not be traded multiple times well above sales growth.