Apple Stock: Delivering For Everyone (NASDAQ:AAPL)

On Wednesday, technology giant Apple (NASDAQ:AAPL) held its much anticipated September product unveiling event. This year, expectations had been a little muted as consumers grapple with high inflation, so device pricing was going to be the key theme. In the end, Apple delivered with something for everyone, which could set up the company nicely for the holiday season.

Let me start with some of the non-core products. Apple Watch Series 8 features a new temperature sensor along with some other tracking features, plus car crash detection. The company unveiled a new entry level SE version that goes for $249, which has a 30% larger face and is 20% faster. Consumers are also being treated to a new Ultra version that starts at $799, which is larger and has better battery life, while being geared towards the extreme fitness crowd. A second generation of the AirPods Pro was also unveiled, featuring a new chip and much improved audio.

Of course, the star of the show was going to be the new series of iPhones. As expected, the new iPhone 14 and 14 Plus are 6.1 and 6.7 inches, respectively, and contain last year’s A15 Bionic chip. These phones, along with the Watch, have a new service using Globalstar (GSAT) satellites for emergency use. The Plus model has the best battery life ever in an iPhone according to the company, while these two entry level devices feature a much improved camera system. The 14 will be available on September 16th, which gives it more than a week of sales in the current fiscal Q4 period, while the 14 Plus isn’t available until October 7th.

As for the Pro versions, they have a pill-like space at the top of the screen, known as the Dynamic Island, that changes based on the type of notification or action that is occurring, such as charging a phone or playing music. These models have an always-on display, along with a brighter screen and 48 megapixel camera sensor, and feature the newest chipset, the A16 Bionic. Perhaps the biggest news for the iPhone on Wednesday was pricing, which can be seen in the graphic below.

There were a handful of reports in recent weeks and months that Apple may increase prices this year, primarily due to inflation. Lately, these rumors seemed to focus more on the Pro versions only, but it turns out we didn’t get any true price increases. Apple is swapping the mini for the Plus, which is a positive for average selling prices, along with the 12 this year being more expensive than the 11 was last year. For those looking for some value, the base 13 mini and regular 13 have double the storage than their year earlier counterparts did last year at the same price.

The key for Apple here in my opinion is that it is improving its effort to provide something for everyone. Look at what the company did with the Watch. It has its primary version of the device, a cheaper “SE” model, and now a premium Ultra model. This year, Apple has separated the Pro versions of the iPhone a bit more from their entry level counterparts, given the higher end models get the newest chipsets, yet they didn’t get an added price boost. As some of the early analyst comments suggest, Apple delivered modest upgrades this year, so it didn’t take advantage of the consumer by raising prices in a tough inflation environment.

While it may not be as important as it used to be, the iPhone is still the dominant product line for Apple. In the first nine months of the current fiscal year, which ends later this month, sales of the smartphone represented more than 54.2% of the company’s revenues. That’s actually up a little over the prior year’s first three quarters, as supply chain issues have pressured sales of other devices. As the graphic below shows, the iPhone has still shown some decent revenue growth over the longer term. The 2022 number below with an asterisk is my current estimate, and the key here is that the iPhone could be about to report its first $200 billion fiscal sales year.

It was just a couple of weeks ago where Apple shares were north of $175 and the financial media was talking about a new all-time high potentially coming soon. However, the market has pulled back on fears that the Fed will need to continue its aggressiveness to slow down inflation. September is also the month where the Fed’s maximum balance sheet runoff amount doubles. Thanks to the pullback, the average price target now represents decent upside for Apple shares, but this is a very tough environment to recommend going long almost any name.

In the end, my key takeaway from Apple’s event on Wednesday was that the company wants to deliver for everyone. The company broadened the Watch lineup by introducing a new Ultra model, while also providing further separation between the Pro and non-Pro models of the iPhone. While there were concerns that Apple could raise smartphone prices, it kept things mostly in check, other than the switch out of the mini for the new Plus model. The company certainly delivered the goods, so now investors will be watching to see how responsive the consumer is.