Apple (AAPL.US) shares surged this year but the company has so far not indicated where it sees a place for itself in terms of AI technology development. What's more, Q2 results showed that the company is stagnating in device sales although it continues to post record net profits and improve margins. Today, Apple will unveil the latest flagship iPhone version 15. This event is always widely reported in the technology industry and if the company, along with the presentation, provides more clues about, for example, the potential development of Apple AI so called Siri. The stock price may also react to it.
Context of the iPhone15 premiere
- Apple continues its strategy of monotizing most of the improvements to 'Pro' models - more expensive than the base versions of iPhones. In times of economic 'prosperity' and consumption, this worked well and quite a few buyers agreed to pay more for the premium versions - their sales outstripped the base versions, supporting margins;
- LVMH recently warned that spending on luxury goods in the U.S. is falling sharply. Although they are different industries, Apple's products are in the premium segment among technology, and LVMH's warning raises a question mark over whether Apple will do as well in a time of expensive credit, high debt costs, tightening credit standards at banks and a potential recession in an environment of elevated inflation;
- 75% of the time to date, Apple's stock price has fallen after the release of new iPhones.
- With officials in China banning the iPhone - the market has begun to fear a potential extension of this 'ban'. China accounts for about 20% of Apple's revenue, and Morgan Stanley estimates lower sales by 4% this year - precisely because of China's move;
- According to Counterpoint Research, smartphone shipments in the global market in Q2 totaled 294.5 million vs. 268 million in Q1 but Apple held its strongest ground against the competition, iPhone shipments totaled 45.3 million vs. 46.5 million previously (but still a lower figure)
- Geopolitics is an additional factor; the company has a manufacturing chain almost entirely in Asia, including much of it in China. Tensions between Washington and Beijing have been rising recently
- Apple estimated that profits this year will fall by roughly 2% through currency effects, indicating that the company potentially expects a weaker dollar (most of its costs are in local currencies, in Asia)
- Potential stagnation in sales could mean that the market will change perceptions of Apple's valuation, which still enjoys the designation of a growth company - driven not only by Apple but also by powerful share buyback programs, high-margin services or the dynamic development of Apple Pay. However, without continued positive growth in device sales, the market may begin to question how much of a valuation premium the company deserves.
Technical analysis
Looking at the chart of Apple (AAPL.US), we see that the price has settled below the SMA50 and SMA100, and the last time it traded below both of them was at the beginning of the year. The main resistance level is set by the 23.6 Fibonacci retracement of the upward wave from January. A potential lower oversold range is at $170, where we see the 38.2 Fibo, and just below at $165 runs the long-term trend-setting SMA200 (red line).
Source: xStation5
