Investment Takeaways From The Latest Apple Keynote

  • Apple launched the iPhone SE, as expected, at the latest keynote event.
  • But, virtually everything else about the keynote wasn’t up to Apple standards.
  • Expect a modest correction in the Apple stock price, following the keynote.

Apple's (NASDAQ:AAPL) March 21st Keynote could have gone a lot worse.  But, I’m going to break it down in the format of the good, bad, and ugly. The investment implications were okay, and were the strongest aspects of the presentation, but the product positioning hasn’t improved in distinct categories (PCs and Wearables). Apple also wasted time with its presentation, which is uncharacteristic of Apple.

The good

The initial price point for the iPhone SE is $400 for the 16 GB model and $500 for the 64 GB model, which was a lot better than the analyst consensus (many analysts were anticipating ASPs of $550). The company also released the iPad Pro 9.7-inch variation, which implies that Apple is going to shift into larger form factor iPads, so it can firmly compete with Laptops and Ultrabooks.

Clearly, the iPad Pro doesn’t have the same performance of high-end Ultrabooks, but the differentiation really isn’t as noticeable, and in many cases, the superior graphics technology of the iPad Pro makes it a more compelling fit for graphic designers/video editors. Furthermore, the iPad is still the king of portability and battery life.

The pricing for the smaller iPad Pro starts at $599 for the 32 GB model and goes all the way up to $899 for a 256 GB model. The iPad Pro comes with A9X, Apple Pencil capabilities and a plethora of other technology features like 4K video capture and better audio capabilities. The incremental improvements could be a needle mover to sales. The storage doubled from the base model on up. I’ve been demanding a refresh that involved higher storage configurations for quite a while now, and Apple has finally delivered.

The bad

The entire consumer electronics market has now entered into secular decline. It has become difficult to release enough new features in each launch to drive replacement demand. People are either frugal or capable of settling for a “good enough” experience for the next couple years. In the earlier innings, Apple was able to drive store traffic upon every launch, but the refresh cycle has really started to elongate, and it’s not clear if Apple can mitigate these trends.

Furthermore, the company excluded the mention of iMac and MacBook Pro refresh. The company believes that the PC market is shrinking and that tablets are taking over, so they’re probably gutting development expense on their PC line-up, or they haven’t developed a major MacBook or iMac refresh quite yet. Chances are, we’ll witness another switch up of internal components later this year, which is quite disappointing because Apple tends to release updates to its MacBook and iMac line-up upon the release of next generation Intel parts.

But, unless Mac’s are capable of VR gaming experiences, I’m hesitant to label a mid-refresh a major update to the product line. Apple has neglected graphic capabilities in Macs for quite a while now, so its positioning is quite poor in the VR space. None of the major VR developers are focusing any attention or effort on Mac OS. So, who are they fooling when they made fun of the aged Windows PC installed base on its keynote stage? The Mac Pro hasn’t been refreshed for a couple years either, and it’s running on older Intel Xeon/Fire Pro series parts. I mean, Apple isn’t doing too hot in PCs or tablets lately, so... they're in the same boat as the entire industry basically.

The ugly

Apple had one of its weaker keynotes, they wasted time talking about renew-ability projects and re-use of Apple components. Seriously? I could have lived without hearing about its CSR (corporate social responsibility) objectives, so they could have spent the 10 minutes further elaborating on new Apple TV features or iOS 9.3. In other words, Apple could have released a press release for this.

Furthermore, the company made no mention of the Apple Watch 2 either…. Isn’t their supposed to be a 12-month release cadence for this device, especially if they’re committed to it? Why isn’t Tim capable of motivating engineers to deliver new technologies in a compressed time frame!? The iPhone went through a rapid iterative phase upon its initial launch, but the Apple Watch 2 wasn't mentioned at all? In fact, they talked about data collection capabilities through its Apple Care Kit application, which integrates with various prestigious health institutions to develop better treatment practices. Oh yeah, they also mentioned new wrist straps. So, the key takeaway from Apple Watch? They had very little to showcase this year.

Okay… definitely not breath taking. Not for a company that really knew how to take our breath away at every Apple event.

Investment take away

Okay, Apple investors – I’m going to be brutally honest with you. This was one of the worst keynotes I’ve seen from Apple in a long time. I will also say, that it was one of the most significant keynotes in terms of iPhone sales, as they have figured out a way to price competitively in the mid-end with a high-end product. The lower pricing of the iPhone SE implies that shipment projections could prove to be a little too modest given the pricing sensitivity of consumer electronics. I will elaborate further on this in a future article.

Furthermore, I anticipate Apple stock to pull back slightly off of its recent momentum. There was good and bad sprinkled all over this keynote. This keynote will cause some indecision among investors, and given the recent price action, Apple stock is well overdue for a modest correction.

Alex Cho Alex Cho   on Amigobulls :
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  • I do not have any business relationship with the companies mentioned in this post.
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