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On Tuesday, Apple Inc. (AAPL) held its first-ever event at the newly built Steve Jobs Theater to introduce the newest versions of its market-leading iPhone.
In the underground auditorium, which is part of the company’s new campus in Cupertino, Calif., CEO Tim Cook unveiled the iPhone 8, iPhone 8 Plus and then the head-turning iPhone X — that’s “X” as in the Roman numeral for “10” not “X” as in the classic movie “Madame X.”
However, stock traders were unimpressed.
Apple stock which had moved higher earlier in the day — inching up during the early stages of the presentation itself — sold off until shares closed slightly lower on the day.
Indeed, AAPL has dipped as much as 2.5% since Tuesday’s event.
Why has the stock disappointed investors and what should you do?
Read on, and I’ll explain what’s happening. And more importantly, I’ll recommend actions that you should consider in your own portfolio.
First off, here are three reasons why AAPL fell in price.
1. The iPhone X will be unavailable until November
Release dates matter, and while the iPhone 8 and iPhone 8 Plus will be available to preorder later this week and available in stores next week, the same can’t be said about the bar-raising iPhone X.
The iPhone X won’t be released until Nov. 3, which means that it won’t be out in time for Apple’s fiscal 2017 year, which wraps up at the end of this month.
There may be merits to delaying the release of a hot device with a big-ticket price until November — just ahead of the holiday shopping season.
But, the delay will likely mean that Wall Street analysts, who are preoccupied with short term, will begin paring back Apple’s moneymaking potential for the current quarter.
2. The short shelf life of planned obsolescence
The iPhone 8 offers several upgrades over the iPhone 7. But don’t be surprised if demand is weaker than we’ve seen in previous upgrade cycles. Buyers lining up at your local Apple retailer this weekend will be doing so knowing that the newer, shinier iPhone X will be rolling in within the next six weeks, which may put a lid on upgrade sales in the short run.
3. Apple stock has already had a great run this year
Shares of Apple have soared so far this year … Â up 39% through Monday’s close. What’s more, AAPL is up 77% since bottoming out last summer. The bulls, who have been looking forward to the introduction of iPhone X for more than a year, are beginning to worry about where Apple will find its future growth.
But in my view, all of these are short-term concerns only.
Here’s why …
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This chart reports how important iPhone sales are to Apple since the original iPhone’s launch about 10 years ago. iPhone revenue as a percentage of Apple’s total revenue reached its peak in 2015 at 69 percent. But it still accounts for 55 percent of the company’s take as of the third quarter of this year.
This means that any uptick in iPhone sales can really be a needle-mover for the money that Apple rakes in.
Now consider this …
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This chart shows how big the demand for the new iPhone 8 and iPhone X could be and it’s truly eye-popping.
According to Consumer Intelligence Research Partners, 141 million iPhones were in use in the U.S. at the beginning of July. That’s amazing when you consider that there are about 323 million people — Â men, women and children — Â in the U.S.
About 48 million of those iPhones were last year’s models (iPhone 7 and 7 Plus), leaving 93 million — that’s 93 MILLION! — that could theoretically be at least 2 years old leaving their owners wanting an upgrade.
Obviously, not every currently active iPhone 6s is 2 years old, after all Apple still sells the 2015 models at a small discount as compared with last year’s models. But the composition of the installed base indicates that there should be loads of Apple fans waiting to upgrade their aging phones.
Now think about this …
AAPL ranks as the third-largest holding in the Berkshire Hathaway portfolio of iconic investor Warren Buffett. The Oracle of Omaha first established his position in AAPL in 2016. And, according to Securities and Exchange Commission filings, he more than doubled his position early this year.
Here’s what Buffett had to say about why he owns AAPL:
“We happened to be well situated in terms of having these massive home furnishing stores [Nebraska Furniture Mart]. I can learn very easily how consumers react to different things there.
“You can’t move people by price in the smartphone market like you can move them in appliances or all kinds of other things.
“People want the product. They don’t want the cheapest product. Apple strikes me as having quite a sticky product, and an enormously useful product to people that use it. The degree to which people’s lives center around the product is huge.”
And it’s Apple’s fervent customer loyalty that will send the demand for Apple’s future products soaring — including new iPhone 8 and iPhone X.
In a world that’s starving for growth, Apple has the magic potion: expanding revenues, high margins and loyal customers … not to mention tons of cash on its balance sheet.
That’s why, like Warren Buffett, I have included AAPL in the Dependable Dozen and own it in the Safe Money Report portfolio. And if your risk profile permits, I urge you to consider buying AAPL, too.
To get the other 11 names in my Dependable Dozen, subscribe to the Safe Money Report. All 12 of these stocks are up so far this year and three quarters of the them have outperformed the S&P 500, some by a country mile.
Best wishes,
Bill Hall
P.S. If you’d welcome a way to build massive wealth in a very short period of time … and if you like the idea of doing it with renegade companies that are about to go “mainstream” in a big way, this short report will probably be a god-send for you. Read more here …
Bill Hall is the editor of the Safe Money Report. He is a Certified Public Accountant (CPA), Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP). Besides his editorial duties with Weiss Research, Bill is the managing director of Plimsoll Mark Capital, a firm that provides financial, tax and investment advice to wealthy families all over the world.
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The Vodafone iPhone, make working on the go a whole lot easier. Life is difficult enough as it is, so anything that makes it easier is a godsend. The I phones are also like human beings own personal televisions now. This all goes to show how robotics are massively enhancing the life’s of human beings. We are now living through a technology revolution which is replacing the industrial revolution that happened 120 years ago. We live in interesting times as the Chinese would say.
I-PHONES ARE TARGETS OF HACKERS
John McAfee, antivirus pioneer, recently said in an interview on the hacking of Equifax that hacking I-Phones is ” a piece of cake ” for them. He said all I-Phones are vulnerable to hacking. All that need be done by a hacker is to download a program or such to track your log-ins.
This is especially true if you have bitcoin stored in (any) mobile device, as they can discover you “key” and pick your “wallet” or bank account, as the case may be. The concentration of large amounts of consumers using this one device makes it quite a prize for successful hacks and assures plenty of (silent) victims in perpetuity.