Apple AAPL The iPhone 14 was recently released and investors will be wondering if the phone will have a significant impact on Apple’s earnings. The iPhone 14 was released on March 8thth August, and critics have pointed out that there isn’t much of a difference between the previous phones and the new ones. The disappointing revelation caused Apple stock to fall nearly 1% during the trading session. Meanwhile, Apple is down nearly 4% during Tuesday’s trading hours as hotter-than-expected inflation weighed on markets.
The iPhone 14 is priced at $799 while the iPhone 13 has been discounted to $699. Apple has done away with the iPhone mini and instead now has two main models, a 6.1-inch iPhone 14 and a 6.7-inch iPhone 14 plus. Apple has rolled out a number of new features for the latest phone including the addition of satellite connectivity capabilities, the addition of eSim capabilities, 8k video recording and the new A16 chips. Apple’s fans won’t be overly impressed, but given the product’s stickiness, expect the phone to continue to dominate sales.
The iPhone 13 has dominated all of last year, and despite similar comments about the lack of improvements over the last year, the phone has surpassed all expectations and pushed its way to second place behind Samsung in terms of market share. The iPhone 14 could see similar improvements, and Apple’s decision not to increase the price will likely play a key role in gaining market share next year. Apple currently has around 20% market share of the smartphone market, and considering countries like China, where the phone has seen the most traction, are likely to see an improvement in consumer demand as lockdowns ease on average, Apple’s market share could quickly rise 22-23% in the near future.
iPhone sales in the second half are expected to be slightly higher despite a global slowdown, the current production forecast is estimated at 240 million units, and sales could reach 300 million units. iPhone sales were $40 billion last quarter, but due to a number of economies, notably the opening up of China and improving sales of the new iPhone 14 model, next quarter iPhone sales could reach $55 billion US dollar to rise in fourth quarter.
AApple business prospects
Apple stock has remained relatively resilient despite continued pressure from the broader market. The iPhone continues to grow its market share both domestically in the US and in global markets. Surprisingly, according to the latest reports, Apple now has over 50% of the domestic market share, with sales rising sharply in recent months. Unfortunately, Apple is increasingly relying on iPhone sales to drive revenue, and while it has had some support from the App Store, the increasing reliance on the iPhone could worry investors.
Take a look at the basics and technical aspects of Apple.
Apple’s valuation remains elevated, and given that dividends are increasingly favored over growth in the near term, the stock remains vulnerable to a correction. The current put-call open interest remains relatively neutral at 0.94, suggesting investors clearly believe the stock is correctly priced considering Apple has continued to gain market share. You may be right, but it remains to be seen whether valuations will hold up as global economies face mounting headwinds. And the decision to keep the price of the latest iPhone constant may actually have been a good decision all things considered. Regardless, free cash flow remains healthy, but as Apple increasingly returns cash to investors, cash holdings have continued to fall in recent quarters. The current price-to-earnings ratio of 26 could mean the stock retraces to $175 if the next few quarters live up to expectations.
risks to the stock
But given the current economic climate, risks remain on the downside. Recent inflationary pressures come hotter than expected as core CPI continues to rise and input costs will come under pressure. Apple’s margins could come under pressure as rising costs and recently flat iPhone costs could negatively impact fourth-quarter results. In addition to rising costs, Apple’s rest of its products, with the exception of the App Store, continue to struggle as desktop and laptop sales weigh on revenue. But for now, the future remains bright and the coming quarter looks set to be exciting as investors eye new highs for the stock.
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