Apple is expected to announce foldable iPhone. What it means for the stock
Apple is expected to unveil a foldable iPhone on Wednesday as part of its annual new product launch. While excitement is swirling among consumers, Wall Street is staying cool regarding the potential announcement’s prospects for the stock. Despite the hype, investors don’t foresee a big move — and some think the news could prompt some to offload shares. “I’m not expecting the stock to do a whole heck of a lot coming out of the announcement,” Michael Khouw, YieldMax strategist at Tidal Financial Group, told CNBC on Tuesday. “It usually doesn’t.” AAPL 6M mountain AAPL six months A ‘sell-the-news’ event? Bank of America analyst Wamsi Mohan floated the idea that the product launch could be a “sell the news” event, wherein shares rise ahead of an announcement and then fall once the news is out. “Will investors once again ‘sell’ the launch event?” Mohan wrote in a Tuesday note to clients. “Apple shares have often exhibited a modest ‘sell the news’ reaction immediately following launch events.” Mohan’s research shows that the stock fell the day after 10 of 24 Apple product launches going back to 2007. On five occasions, shares remained flat. They also rose the day after on nine other instances. Over a longer time horizon, however, Apple shares pick up steam, posting gains 60 days after 17 of 24 product launches. Stock drivers On Wednesday, the stock may respond to announcements on anticipated product price hikes, commentary on projected levels of demand for the rumoured foldable phone, and news about Apple’s incorporation of large language models into its technology. “What’s up on Apple AI?” said Paul Meeks, head of technology research at Freedom Capital Markets. “A very expensive foldable phone doesn’t get me jazzed. Samsung has had one for years.” Laura Martin at Needham also expressed concerns about the price of the rumored foldable phone in light of higher memory costs amid surging demand for the component. “We worry about its price point and volume limitations, given rising memory prices and advanced-node supply constraints,” she wrote in a note to clients. Martin said valuation upside will mostly come from commentary from Apple CEO John Ternus on “products that will drive a near-term iPhone replacement cycle.” On price hikes, analysts think that Apple needs to increase prices by as much as $100 in order to preserve profit margins and that the company’s brand can justify this change in the eyes of customers. “We estimate an extra memory cost of USD100 – 150 per smartphone. Hence we would expect Apple to increase prices by at least USD100,” Nicolas Cote-Colisson at HSBC wrote Tuesday. “We believe Apple’s brand commands high pricing power.” Investment bank MoffettNathanson analyzed the material input costs for foldable phones in a Tuesday note, finding that it needs to be priced close to $2,500 per unit in order to boost margins. “If we … compare the [bill of materials] cost to expected iPhone Ultra pricing of $2,000+ to 2,500, we can see that the iPhone Ultra will either be slightly dilutive to ~40% standard iPhone product margins if priced at the low end of the expected range, or accretive if priced at $2,500,” Craig Moffett wrote to clients. “This is pricing that approaches the cost of a baseline MacBook Pro,” Moffett added.
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