Apple stock rallies despite product launch criticism
It's taken stick for this product launch, but buyers are still chasing the shares toward new highs.
11th September 2019 15:16
by Graeme Evans from interactive investor
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It's taken stick for this product launch, but buyers are still chasing the shares toward new highs.
Even if it lacked the wow factor of previous Apple product launches, this week's annual "big reveal" by the tech giant should go some way to easing the nerves of investors.
Among the eagerly-anticipated presentations at the Steve Jobs Theatre in Apple HQ were the launch of three iPhones and a new streaming TV service, Apple TV+, to rival the likes of Netflix.
The move into TV subscriptions — at a price to customers of just £4 a month — was the biggest surprise as it represents a big step up in the push by Apple to accelerate growth in Services, which accounted for just over one-fifth of sales in the most recent quarter.
While the iPhone has been the product sensation of the millennium and still accounts for about half of the company's revenues, customers are taking longer to replace their handsets as innovation slows. The two most recent quarters saw sales of the devices fall by 12% and 17%, fuelling the concerns of investors about how Apple will take up the slack.
However, with a user base of 1.4 billion active devices there's plenty to go for in terms of Services and encouraging customers to use the likes of Apple Music, Apple Pay or its App Store.
TV streaming will add another revenues strand, although the full benefits won't be realised for some time as Apple will initially focus on building viewing figures through the offer of a free one-year subscription to anyone buying a new Apple device.
The plans for a November launch of the TV service stole some of the headlines from the unveiling of three new iPhone 11s, two of which feature the first triple lens camera. Whether longer battery life and the choice of wide-angle, telephoto and ultra-wide-angle lenses will persuade users to upgrade their devices from next week onwards remains to be seen.
Source: TradingView Past performance is not a guide to future performance
In the meantime, however, the developments from Apple's biggest marketing event appear to have done no harm to investor confidence or a share price that's already recovered impressively since last winter's stock market sell off.
At $216, the $1 trillion-valued company is back within sight of the peak of $233.47 seen last October. In the wake of yesterday's event, Morgan Stanley analysts continue to see the potential for Apple shares to reach $247.
They forecast growth re-accelerating in the 2020 financial year, with new services and the upcoming 5G cycle suggesting there is more upside than downside risk to the business. The Wall Street bank's price target implies a 2020 price/earnings (PE) multiple of 19.5x.
In July, Apple reported results which broadly exceeded analyst expectations, with both revenues and earnings per share metrics surpassing forecasts. Sales from the Services business rose by just under 13% to hit a new record.
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