Apple’s new iPhone SE and iPad Air are about to be unveiled. At least, these are the rumors that Bloomberg has just shared. Both devices could be announced next month.
If confirmed, these will be Apple’s first new products of the year. Should investors anticipate the announcement and buy Apple stock (AAPL) – Get Apple Inc. Report? The Apple Maven looks at the opportunity.
Figure 1: New iPhone and iPad: Buy Apple Stock Ahead Of The Event?
Unsplash
(Read more from the Apple Maven: Apple Stock: Jim Cramer’s Ideal Entry Price, And What To Do)
Are the iPhone SE and iPad Air important?
The iPhone SE, Apple’s smaller and less powerful handheld device, has historically been a Spring novelty. Since 2016, when Apple introduced the SE concept, new versions have been announced around March or April.
The iPhone business is, by far, the most important piece in Apple’s total revenues. It accounted for 52% of the company’s sales in fiscal 2021 (see below). Better yet, iPhone revenues grew at an outstanding clip of 34% in the past four quarters, the most of any segment.
Figure 2: Fiscal 2021 revenue by segment.
DM Martins Research, data from company reports
Judging by the recent earnings call conversations, much of the success can be credited to the higher-end models. The iPhone 13 was launched in September 2021, and the early part of this new upgrade cycle has proven to be robust.
The new iPhone SE can probably help to boost sales among the more price-sensitive consumers, particularly in emerging markets. This would be good for demand diversification — think of mid-2020, when the SE saved the quarter for the iPhone segment. The fact that the new model should be 5G-ready might make the device even more appealing.
The iPad Air, in my view, is less likely to be a game changer. Yes, the tablet segment has been struggling lately: it was the only to post a YOY decline in revenues in fiscal Q1 — see chart below. The new device could help by introducing newness to the business.
Figure 3: FQ1 2022 revenue growth by major segment.
DM Martins Research, data from company reports
But then, the iPad is much less important for Apple’s total revenues, having accounted for only 9% of sales in fiscal 2021. Also, much of the recent decline in units shipped has been associated with component shortages, not lack of demand per se.
So, refreshing the iPad lineup will be important to the extent that the current version is already 15 months old. Maybe the new model will be equipped with the M1 chip, as is the case of the current Pro device. But to revenues and earnings, I don’t expect much of an impact here.
So, buy AAPL now?
In my view, buying Apple stock now solely in anticipation of the new iPhone SE and iPad Air does not make too much sense.
From a product launch perspective, I believe that only the next iPhone 14, in addition to brand-new product categories (think Apple Glass and Apple Car), can be enough of a game changer for the Cupertino company and its stock. Almost everything else is only likely to be accretive to the ecosystem.
In deciding whether buy AAPL, I think that other, more important factors should be considered. Among them are (1) the value of the iconic Apple brand, which seems to be at a historical high; (2) the growth opportunities, which seem plentiful; and (3) valuations that look a bit rich today.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Apple Maven)
