the latest product event, dubbed “Peek Performance,” didn’t really surprise anyone. But last week’s virtual launch provided important clues about Apple’s business, and it helped explain why the company’s shares held up better than other tech giants amid the latest volatility.
Apple shares (ticker: AAPL) have been roughly flat since the
peaked in November. That’s an impressive performance considering the sharp double-digit share decline for the rest of the tech giants. In part, the market saw Apple shares as a place to hide, a stable company generating mountains of cash and returning tons to investors. Last week, Wall Street went a little gaga
(AMZN) $10 billion stock buyback, which was associated with a stock split. Apple returned almost as much to shareholders each month through dividends and stock buybacks.
Somehow, the aggressive return-on-capital program hasn’t slowed the company’s innovation engine, and you could see that in the series of announcements last week. Although it lacks the flash of products still at the rumor stage – like cars and VR glasses – the showcase demonstrated that Apple can simultaneously reach budget-conscious consumers while playing with big-budget users. .
As widely expected, Apple has unveiled a new 5G version of the iPhone SE, the entry-level product in its smartphone lineup. It was the most important announcement in the short term from a financial point of view. The SE, which starts at $429 compared to $699 for the cheapest iPhone 13, could boost upgrades for those still using older models. It’s a phone that’s less about buzz and more about filling a hole in the company’s lineup, a cheap option for consumers who want a 5G device.
Apple’s biggest hardware announcement was the M1 Ultra, a new high-end processor that will debut in the Mac Studio, a kind of super-duper version of the Mac Mini aimed at design professionals. The Ultra version of the Studio is priced at $3,999; there’s a low-end model priced at $1,999 that features Apple’s less powerful M1 Max chip.
Apple also announced a new version of its iPad Air tablet; a new $1,599 27-inch display that can be used with Studio or other Apple computers; and a few green metallic versions of his iPhone 13.
The only real surprise was the announcement of Apple’s first big step into sports. The company said its Apple TV+ streaming service has an agreement with Major League Baseball to broadcast two games every Friday night during the season.
Despite a lack of surprises, Wall Street still found something to digest. Here are six takeaways from the event:
The chip shortage isn’t slowing Apple’s product push. Jefferies analyst Kyle McNealy said rapid shipment dates for new products suggest a “relatively benign” supply environment. “It was one of the most positive indicators of the event,” he wrote. “We believe this indicates either a relatively benign supply environment or an improved supply position at Apple, driven by inventory and firm purchase commitments.”
The new low-end iPhone is expected to boost sales and drive upgrades. Morgan Stanley analyst Katy Huberty wrote that Wall Street’s iPhone estimates for the current year may now be too low. She thinks the updated iPhone SE should be “a new tool to help drive upgrades” from users of older iPhones. The phone is also slightly more expensive than the latest SE model.
The SE could take business from Android. Cowen analyst Krish Sankar believes the new SE is well positioned against Android devices and could boost market share gains, particularly in Asia.
The new M1 Ultra chip is what Steve Jobs would have called a “howler”. Basically two M1 Max chips stitched together, the Ultra chip delivers performance far beyond any previous Mac processor. UBS analyst David Vogt writes that the M1 Ultra “is the most significant long-term development” unveiled at the event. He notes that Apple has increased the Mac’s market share to 9% from 7.5% since launching the first M1-based laptops in late 2020.
The sum of the parts is greater than the whole. Morgan Stanley’s Huberty writes that while Apple’s new products won’t move the needle on a stand-alone basis, “they will collectively represent tens of millions of additional product shipments that will help Apple maintain retention rates at the industry-leading, attract new users and increase both hardware and service spend per user.”
Apple’s MLB announcement highlights the inevitable shift from sports to streaming. Needham analyst Laura Martin notes that the announcement follows Amazon’s deal for NFL games. She thinks
(NFLX), which has yet to enter the sports fray, is at a disadvantage in the streaming wars.
Apple stocks aren’t without risk: The company has seen an unsustainable surge in demand for hardware during the pandemic, as consumers have retreated and established home offices. pc manufacturers
(HPQ) both recently reported slowing consumer sales; a slowdown in consumer tech spending would almost certainly have consequences for Apple.
But Apple is an innovation and a slot machine. The company seems destined to continue to gain market share in PCs, phones and online services. And its aggressive buybacks will continue to support the stock price.
Talk about peak performance.
Write to Eric J. Savitz at [email protected]