Will IPhone 7 Launch Be A Game Changer For Apple Inc Stock?

  • Three consecutive quarters of declining iPhone sales have raised a question on consumers’ interest in the product.
  • iPhone 7 launch tomorrow will showcase new features, but major innovation and upgrades are expected next year.
  • Wall Street’s view of the iPhone 7 launch appears mixed; sales figures in the 3rd and 4th quarter will be key.

Apple Inc. (NSDQ:AAPL) is all set for the iPhone 7 launch in September. GSM Arena reports that the iPhone 7 and iPhone 7 Plus will come in various storage models including 32GB, 128GB and 256GB, which would be a deviation from the 16GB, 64GB and 128GB that the company offered in the previous years.

There have been rumors about the features. The notable change in the new iPhone 7 will be a new dual-camera at the rear, albeit the loss of the headphone jack is expected. It will also be a faster phone with the new Apple A10 processor, M10 co-processor and 3GB of RAM. However, everything else is expected to be the same as Apple is reportedly saving up for next year’s iPhone release.

Also Read: 3 Reasons To Buy Apple Inc Stock Ahead Of iPhone 7 Launch

Investors are somewhat getting nervous over the company’s prospects. The latest Gartner report suggests that Apple registered three consecutive quarters of declining demand. In the 2nd quarter of AY 2016, Apple sold 44.4 million units, which is a 7.7% drop compared to the same period last year. Its global market share has likewise dropped to 12.9% during 2nd quarter 2016, also lower from the previous year’s market share of 14.6%.

The report further added that the company reflected a double-digit decline in Greater China and Asia/Pacific regions. In contrast, Apple performed better than expected in Eurasia, Sub-Saharan Africa and Eastern Europe regions, but this was not sufficient to cover up for the losses in its key regions.

Table 1: Worldwide Smartphone Sales to End Users in 2Q 2016 (Thousands of Units)

Brands 2Q16Units 2Q16 Market Share (%) 2Q15Units 2Q15Market Share (%)
Samsung 76,743.5 22.3 72,072.5 21.8
Apple 44,395.0 12.9 48,085.5 14.6
Huawei 30,670.7 8.9 26,454.4 8.0
Oppo 18,489.6 5.4 8,073.8 2.4
Xiaomi 15,530.7 4.5 15,464.5 4.7
Others 158,530.3 46.0 160,162.1 48.5
Total 344,359.7 100.0 330,312.9 100.0

Source: Gartner Report August 2016

It is unclear whether consumers have lost interest in the iPhone or they are waiting on the sidelines for the new product to come out. One of the key concerns is that the innovation may not be sufficient to generate interest considering that Android phones have also come up with additional features. However, this has yet to be seen and investors could take a cue from the subsequent third and fourth quarter industry reports.

Even Wall Street’s opinion appears mixed. Cowen and Co. is optimistic about the company’s future, noting that the anticipated launch of the iPhone 7 is a bridge to the new cycle of innovation, which is expected to start in 2017. Wells Fargo advises to pick up Apple shares in view of the iPhone upgrades. In contrast, Oppenheimer & Co. is not optimistic over Apple’s iPhone 7 as they expect fewer users to replace their older models.

The average target price for AAPL shares is pegged at $124 per share or a 17% upside from the current share price. On a longer term basis, Apple stock may be a good investment with a strong ecosystem and loyal customer base.

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