Stock of the week - Apple (16.09.2021)

Apple (AAPL.US) unveiled its new products during an event on Tuesday, including new iPhone 13 smartphones. As it is usually the case, the event was eagerly awaited by Apple fans as well as investors and analysts. Let's take a brief look at new products and what is expected to drive the company's sales in the near future.

Apple unveils iPhone 13 smartphones

Apple unveiled its newest smartphone models from the iPhone family on Tuesday. New iPhone 13 smartphones have longer battery lives as well as improved cameras. Prices of new basic products are similar to iPhone 12 launch prices. Apart from smartphones, the company also unveiled a new line of smartwatches - Apple Watch Series 7 - and new iPads.

Some criticized Apple for lack of new features in iPhone 13 compared to iPhone 12, with changes being more of a technical nature. However, analysts remain generally upbeat when it comes to the sales outlook. 

Sales outlook

An important thing to note is that Apple is gaining market share in China, which is an enormous market for the company. As iPhone 13 is a 5G smartphone, the product is expected to be fiercely marketed by operators in China, as availability of 5G services is increasing and ownership of 5G smartphones is low. New iPad mini products also support 5G technology. There are some concerns that sales may slow following a hot year-end season but the consensus among analysts is for iPhone 13 sales to continue the strong momentum of iPhone 12 sales.

Apart from increasing market share in new markets, especially China, Apple is also expected to see big demand from its previous customers. Analysts note that because of the high share of models that are 3 years or older on the market, sales in US and Europe are likely to be driven by users replacing older models with new ones that support new technologies, like 5G.

Market reaction

Apple shares finished Tuesday's trading 0.96% lower. While one may view this as a sign that iPhone 13 was received negatively by the markets, it is not necessarily the case. A chart from Bloomberg shows that it is in fact quite common for Apple shares to move lower after unveiling new products. One reason for this is that Apple has a good record of releasing solid products and booking large orders. Because of this any positive impact from new product announcements is usually priced in before the actual announcement and following product events some profit taking usually takes place. In fact, the announcement of the first iPhone smartphone was the only case when Apple stock experienced a major positive reaction. In most cases the reaction was negative and the scale of the drop usually did not exceed 2%.

Share price reaction to Apple iPhone announcement events. Source: Bloomberg

When it comes to the current situation on Apple (AAPL.US) chart, we can see that the stock has recently pulled back to the upward trendline. A drop below the $150.00 support can be slightly worrying as it is marked with the lower limit of the market geometry, 23.6% retracement of the upward impulse launched in June, 200-hour moving average (purple line) and previous price reactions. However, it looks like the drop was halted for now and price tries to climb back above this zone. Climbing above this area would reignite hopes for revisiting all-time highs that lie around 5% above Wednesday's closing price.

Source: xStation5