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What does the iPhone 13 reveal mean for the Apple share price?

The Apple [APPL] share price appeared unmoved during trading after the iPhone maker’s latest annual product announcement on 14 September. Down close to 1% to close at $148.12, the Apple share price’s flat performance could be an indication that investors aren’t expecting any further major updates from the technology major.

Even going into the event, the Apple share price had been muted. Last year, Apple announced the launch of the iPhone 12, a handset that pushed the company into the 5G era and triggered supersized sales for a business segment that accounts for the lion’s share of its total revenue. 

 

 

 

This year expectations weren’t as high. While Apple launched its next-generation iPhone 13 at the event, among other products such as a new generation Apple Watch and new AirPods, this was more of an exercise in refining its 5G handset.

Yet, with millions of customers still to upgrade to 5G, the iPhone 13 is likely to continue to drive sales, and with the Apple share price subdued, it could be a buying opportunity ahead of the company’s next set of earnings results due in October.

 

What’s happening with the Apple share price?

The Apple share price is up 16% over the past three months (as of 14 September), trouncing the Nasdaq’s 6.9% gains over the same period. However, the stock dipped throughout late August and early September, with the Apple share price trading flat over the past month.

One obvious headwind was the decision by a federal judge to make changes to its App Store payment operations to allow third-party payment methods. The decision triggered a steep selloff in Apple’s share price on 10 September, with investors worried about the profitability of the company’s app business.

 

Why should investors care about the iPhone launch?

The iPhone is Apple’s biggest cash cow. In the first quarter of the year, revenue from the product came in at $65.50bn, up 17% year-on-year, and accounted for over half of the company’s $111.44 total revenue in the quarter. In the second quarter, sales were brisk, hitting $47.9bn, up 65% from the same period last year and quelling investor fears that the ‘super cycle’ would come to an end.

That growth puts pressure on the iPhone 13. The latest iteration of the smartphone sees some improvements on the 12, but it’s not a complete overhaul. Refinements include longer battery life, an improved camera, and better storage. The Apple Watch Series 7 might see a more substantial overhaul, including bigger screens, bigger buttons, and 18 hours battery life.

$65.5billion

Apple's Q1 product revenue - a 17% YoY rise

  

Rather than a technological shift, the iPhone 13 is more about extending the portfolio of 5G iPhones, with Apple benefitting from millions of customers who are planning to upgrade to the next generation of iPhone. Prices start at £679 for the iPhone 13 mini and £779 for the iPhone 13, with pre-orders being taken from 17 September.

In effect, the iPhone 13 creates another price point – a newer, expensive model for those either upgrading from the 12 or who have held out in anticipation of an improved 5G iPhone this year. On the other hand, the iPhone 12 now becomes a more affordable model for people yet to upgrade.

 

Where next for the Apple share price?

Price comparison website Uswitch forecasts that at least 10 million UK customers could be planning to upgrade their iPhones to the latest generation this year. The underlying survey of 2000 UK adults found that 34% of respondents wanted lower prices while 27% wanted a charger included in the box.

“Apple has the most loyal fans of any smartphone brand, and it's no surprise that millions of iPhone users will be queuing up to get the newest device as soon as it launches,” Catherine Hiley, mobiles expert at Uswitch, said. “Consumer confidence is high, and we're expecting that the iPhone 13 launch could be bigger than anything we've seen from Apple for several years.”

“Apple has the most loyal fans of any smartphone brand, and it's no surprise that millions of iPhone users will be queuing up to get the newest device as soon as it launches. Consumer confidence is high, and we're expecting that the iPhone 13 launch could be bigger than anything we've seen from Apple for several years” - Catherine Hiley, mobiles expert at Uswitch

 

At the start of September, Wolfe Research upgraded Apple’s share price from underperform to peer perform, moving its price target from $135 to $155 off the back of strong iPhone 12 sales. Analyst Jeffrey Kvaal cites Apple’s strong supply chain, which should allow Apple to produce 90 million iPhone handsets in the second half of the year, up from the 80 million in the same period of last year.

Among the analysts polled on Yahoo Finance, Apple’s share price has a $167.27 price target, hitting this should see a 13% upside on 14 September close..

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

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