Apple's 'Far Out' event: What the analysts are saying

Excerpts from the notes I've seen. More as they come in.

Toni Sacconaghi, Bernstein: Our key takeaways from yesterday's iPhone announcements. Consensus iPhone estimates for the December quarter imply well below historical average sequential growth, despite an extra week. iPhone 14's availability timeframe is in line with history, pointing to “normal” December seasonality, though Apple has an extra week in its quarter, which all else equal should help 7-8%. Consensus is looking for 68% sequential iPhone revenue growth in CY Q1 (Dec), which appears conservative relative to an historical average of 87%). For the full year, we model iPhone revenues down modestly in FY 23, slightly below consensus. We note that the strength of an iPhone cycle is typically dictated by its December performance... Consistent with history, Apple's stock reaction was muted yesterday (-100bps relative) and we expect the stock could largely tread water for the several months, until investors gain better visibility into the strength of the iPhone 14 cycle. Market-Perform. $170.

Kyle McNealy, Jefferies: 48MP Camera, Smaller Notch and Carrier Promotions. Apple announced its iPhone 14 lineup as well as a new Apple Watches and the 2nd Gen AirPods Pro. Much of the announcement was in-line with our expectations with a few modest surprises. Specifically, we like the carrier promotions in the US that were announced in conjunction with the product launch. The iPhone lineup got feature upgrades all around – faster processors, camera upgrades, new safety features, and a smaller pill shaped notch. We like the new larger 48MP camera which is a big jump versus the 12MP they’ve kept for the last 7 years. We also think the smaller notch is something that can move the needle as the notch has been a detractor versus all-screen devices. While 5G devices have been shipping for two years now, we think Apple is still in the very early stages of the 5G cycle as evidenced by the sub-5% quarterly upgrade rate among US wireless carriers. Buy. $200. 

Harsh Kumar, Piper Sandler: Apple Unveils Four New iPhones at Launch Event. In our view, most importantly, ASPs for these phones were kept consistent with last year’s models, and given the constrained economic environment we think this is an incremental positive for Apple. Apple once again pushed the limits with small feature updates, and in our opinion, it added 2 killer features: crash detection and Emergency SOS support via satellite. On the topic of prices, the new iPhone 14 is priced at $799 and the 14 Plus at $899. The Pro is priced at $999, while the Pro Max is priced at $1,090. On each of the four models, consumers can get significant discounts with suitable trade-ins. Again, in our view, prices consistent with last year are likely to be a significant advantage for Apple. Overweight. $195. 

Samik Chatterjee, J.P. Morgan: Pricing Maintained in Nod to Modest Feature Updates and Macro; Positive Surprise for Investors Braced for Worse. Apple’s product announcements for iPhones, Apple Watches and AirPods were largely in line with expectations heading into the event in relation to features. However, despite limited surprises in terms of features, which are typically correlated to a share price sell-off, the shares tracked well as pricing across the devices was largely maintained, likely acknowledging the more modest feature updates as well as the challenging macro backdrop... Additionally, the aforementioned in combination with limited features on the lower-tiered models could have implications on the mix for the latest iPhone cycle. To that end, we view the 2022 Product Launch as a modest positive with Apple able to reflect the anticipated feature updates across the products in the respective pricing despite concerns of increases from the investment community. Overweight. $200.

Gene Munster, Loup Ventures: A Masterclass in Refinement and Innovation. Apple's Fall iPhone event stuck to the company's Playbook for Success. Take a loved product, progress its features and refine its look while maintaining its price point. I'm so familiar with the Playbook that I forget it has a tried-and-true track record of inspiring Apple consumers to buy more products as well as fostering new members into the family. Collectively, Apple's newly announced iPhones, Watches and AirPods should be enough to deliver an upside to the September numbers, despite one of the four iPhone models not shipping in October. Looking to FY23, I believe there were enough announcements for the company to slightly exceed the consensus estimate of 5% revenue growth.

Gadjo Sevilla, Insider Intelligence: The move to the larger iPhone Plus size is likely to be the biggest reason for consumers to upgrade. Apple reusing the A15 chip for a second year helps it use up its stockpiles while differentiating more expensive Pro models. The Apple Watch is a mature product category with well-established benefits. Apple can now cater to the entry level with the Apple Watch SE and develop the adventure and high-performance segment of the market with Apple Watch Ultra. This will be easier to market than its previous use of gold, titanium, and ceramic materials as premium differentiators.

Daniel Ives, Wedbush: iPhone 14 Unveiled To Kick Off Another Strong Product Cycle Despite Macro. The Apple Watch and AirPods have transformed from a rounding error to a significant tangential product segment at Apple and speaks to the monetization of a golden 1.8 billion iOS installed base that remains unmatched globally. Taking a step back, launching 3 new core hardware products within the Apple ecosystem despite the biggest supply chain crisis seen in modern history is a major feat for Cook & Co. especially with the zero Covid shutdowns in China seen in April/May... For pricing the iPhone 14 Pro will be $999 and iPhone 14 Pro Max will start at $1,099 with NO price increase which was a surprise to the Street. Outperform. $220

Amit Daryanani, Evercore: Tim Cook Wants to Make Sure You Are Healthy and Safe. Throughout the event, a lot of emphasis was put on new safety features including car crash detection in both the iPhone and Apple Watch as well as a new emergency messaging system that leverages satellite connectivity to send emergency messages when cellular connections are not available. Apple announced the Watch Series 8 and also debuted a new product called the Apple Watch Ultra which is targeted at the more extreme sports end of the market with a particular emphasis placed on its functionality for scuba. The Watch will also feature a new sensor which can measure the wearers temperature. AirPods upgrades weren’t major but included a 33% increase in battery life and a 2x increase in noise cancellation (both driven by new H2 chip). Outperform. $185.

30 Comments

  1. Robert Varipapa said:
    The Apple Watch Ultra is a bargain.

    Bigger screen, better speakers and microphone, longer battery life and sapphire screen, all for $799 (which is a similar price as some of the high end Series 8 versions.)

    My suspicion is that my daily use of Apple devices will include a lot more time with the Apple Watch Ultra.

    8
    September 7, 2022
    • Cy Manning said:
      Agreed. Mine is on the way.

      2
      September 7, 2022
  2. Kirk DeBernardi said:
    I’ve always referred to the stack of the iPhone • AirPods •  WATCH as a tremendous trifecta for Apple and their worldwide customer base.

    Todays announcements only underscores — not only Apple’s skill at polishing the stone for each of these items – but virtually guarantees that they have a long runway ahead of them as the world continues to accumulatively pick up what Apple is putting down.

    Iteration. Iteration. Iteration.

    They own it like no other.

    9
    September 7, 2022
    • Romeo A Esparrago Jr said:
      Where would the car crash detection in an  Watch iterate to?
      Where did it iterate from?
      Yes, but when?

      2
      September 7, 2022
      • Aaron Belich said:
        What other kind of movement will that new accelerometer be able to detect!? As they iterate and optimize the hardware / software… “wooo-weee!”

        Apple has already teased accessibility motion detection and control in  Watch. More advanced AR abilities are coming.

        1
        September 7, 2022
  3. David Emery said:
    Gee Mr Chatterjee kinda missed a key point, “NO PRICE INCREASE”. I’m sure some ANALysts will spin that as being bad for Apple. “Did Apple leave money on the table by maintaining prices, in the face of inflationary pressures?”

    1
    September 7, 2022
    • Apple did raise the iPhone 14 prices in certain nations like the UK where the pound has lost value. Not in China though.

      0
      September 8, 2022
  4. Jerry Doyle said:
    In this period of skyrocketing inflation where retailers are jumping their prices Apple HOLDS! (I believed they would 🙂 ).

    That HOLD truly is a “price cut!” Now is the time to upgrade for sure for cost conscious consumers as the iPhone price most definitely will increase next year. That important factor will motivate those consumers thinking of upgrading to do so and others who will do so simply to access the price cut on a new iPhone. 🙂 🙂

    4
    September 7, 2022
  5. Fred Stein said:
    Apple is unstoppable, unbeatable. No Watch comes close. No one can match the satellite feature. This will add first time buyers, while driving upgrades. From Above Avalon, March 29, 2022: (trend may accelerate)

    iPhone new users: 60 million per year (a five-year high)
    Apple Watch new users: 30 million per year (an all-time high)
    iPad new users: 30 million per year (an eight-year high)
    Mac new users: 15 million per year (an all-time high)

    9
    September 7, 2022
  6. Gregg Thurman said:
    Gross Margins as a competitive weapon.

    Imagine cheap Android manufacturers, with their razor thin margins (and limited utility differentiation) NOT raising prices in this inflationary environment.

    Now look at cheap Android buyers eyeing the quality and utility of iPhone (11, 12, 13 and 14) with no price increase. How many (I for one don’t know) will opt to switch during this cycle?

    7
    September 7, 2022
  7. Robert Stack said:
    Interesting that none of the ANALysts (ht to David) above commented on the menstrual cycle detection feature. Hmmm…could it be because they’re all male?

    4
    September 7, 2022
    • David Emery said:
      The comments on period tracking I’ve seen have raised some privacy concerns. I wonder would you trust Google with that information?

      0
      September 8, 2022
      • Robert Stack said:
        @David: The short answer to your Q: No.

        The longer answer: No, but think of all the ads you’ll soon enjoy from Google for tampons and maxi pads! And because Facebook is Facebook, you’ll likely even see a few for iPads! 😉

        1
        September 8, 2022
        • David Emery said:
          From Facebook, I’d expect to see ‘crash pads’ apartments in Fargo ND (for a while, that’s where Facebook was sure I live. Wrong by only 1200 miles..

          0
          September 8, 2022
  8. Gregg Thurman said:
    Nobody said anything about there being no AR headset. How quickly they forget their own predictions.

    0
    September 7, 2022
    • David Drinkwater said:
      I don’t think that that was for this event. If I had a dollar (which I do) I’d bet that that will be a stand-alone event. It is possible that the AR Headset could be a “one more thing”, but I think that, first time out, it will be treated as a (deserved) stand-alone.

      If I’m wrong, I still have many Apple dollars, so my feelings won’t be to terribly hurt.

      1
      September 7, 2022
  9. Bart Yee said:
    New Apple product availability & starting prices:

    Apple Watch Series 8 $399/$499 order today, available Sept. 16, 9 days.

    Apple Watch SE, 2nd Gen., $249/$299, order today, available Sept. 16, 9 days

    Apple Watch Ultra – $799, order today, available Sept. 23, 2022, 16 days

    AirPods Pro, 2nd Gen, $249, order Sept. 9, available Sept. 23, 14 days

    iPhone 14 $799, iPhone 14 Plus $899, both preorder Sept. 9, iPhone 14 available Sept. 16, iPhone 14 Plus available October 7.

    iPhone 14 Pro $999, iPhone 14 Pro Max $1099, preorder Sept. 9, both available Sept. 16.

    In addition to iPhone SE 2020 at $429, iPhone 12 and iPhone 13 at $599

    Apple has covered the entire spectrum of upper midrange to ultra premium with 3 generations of iPhones, all using Apple innovations and silicon. With iPhone 12 and 13 Mini’s leading the $599 price tiers, we should see these pretty much exhaust remaining stock in short order unless Apple decides to keep building them – perhaps in anticipation of moving the Mini to become the iPhone SE 4 in 2023 with a full LCD or OLED display? Hmmm.

    Question will be, does Apple book the sale when preordered or when delivered? I think the former.

    But saving the iPhone 14 Plus to October and Q1which could be a sweet spot for China is really smart, giving more time to build inventory according to preorder demand. Also, for Apple Store countries, more in hand time with the Plus and Max models will give interested consumers plenty of lost sleep deciding on which to choose and the $200 difference, seemingly a paltry sum for such innovations.

    2
    September 8, 2022
  10. Bart Yee said:
    I’ll bet there’s at least two foreign companies and maybe a few politicians trying to build a case that Apple is underpricing it’s iPhone lineup, sacrificing gross margins for sales and undercutting the smartphone market, using its “monopoly power” and “sheer size” to squeeze suppliers and competitors alike. “It’s not FAIR!” they will cry, “How can they put such tech into their products and not raise prices in this inflationary environment??? Now we can’t raise prices lest we look greedy, squeezing our own margins.”

    Lobbyists will say “We need investigations into Apple’s Predatory Pricing Practices (PPP) that threaten our already Minimal Margin Model (MMM) of business. We cannot allow Apple to flood across the most profitable smartphone sectors with flagship tech only two years old!!”

    Apple’s response: “We’ll be doing everything we can to ensure that we meet the demands of our users and customers for this and successive quarters. We anticipate a very busy quarter for our entire supply chain and production partners. We’ll see you at our next event in October.”

    8
    September 8, 2022
    • Jerry Doyle said:
      @Bart Yee: Ha! Well stated my man! Sadly, you probably are spot on. Some country’s regulatory authorities most likely will grumble along with Apple’s competitors who also cry foul!

      1
      September 8, 2022
    • Chris De Armond said:
      Apple announced US pricing. Has anyone checked on foreign pricing to see if they remain the same?

      Also, the much stronger dollar means that all the supply chain parts sourced outside the US are, relatively, getting cheaper so making it easier to hold the line on US price levels.

      1
      September 8, 2022
  11. Michael Goldfeder said:
    @Bart: That’s a very astute prediction analogous to certain countries dumping their steel on the world markets back in the day. The innovation to make all of the analysts’ predictions look extremely misplaced by not increasing prices in the current inflationary period, coupled with Forex prices adding even more headwinds, is nothing short of Apple’s ability to once again deliver value to the consumer.

    Nobody saw this coming and frankly, it clearly establishes the unparalleled advantage Apple has created by bringing in house so many aspects of chip design and their partnerships with suppliers nobody else can match. While competition is good, forward thinking is what separates the haves from the have nots at the end of the day. Apple is in a class all their own and the trolls along with the Negative Nancy’s just look that much more foolish after what I watched from Cupertino.

    How ironic that the talking heads were so certain that this generation of iPhones was going to be the Waterloo for Apple. Yet, they managed to convey to the world that a high end smartphone doesn’t have to be out of reach based on the market perceptions of those competitors who will be forced to raise prices on their extremely inferior products due to supply chain management issues and the inability to keep up with Apple.

    Talk about sticking out like a marshmallow in a bowl of raisins. Who needs an $1800.00 foldable phone that will in all likelihood be yet another dud.

    This was an iPhone product release that IMO was the best one ever due in large part to the way Apple confronted macro issues head on with a savvy presentation. Mark Gurman might have had the date right, but beyond that he was clueless along with everyone else.

    4
    September 8, 2022
  12. Brian Loftus said:
    I thought the negative spin was going to be TMSC yield problems forces Apple to use old chips.

    0
    September 8, 2022
    • John Konopka said:
      @Brian Interestingly, TSMC stock is down. I caught some news on CNBC that TSMC was forecasting lower because of order cuts from NVIDIA and some others. Bad for them but that frees up capacity for Apple.

      0
      September 8, 2022
  13. T R said:
    “Apple reusing the A15 chip for a second year helps it use up its stockpiles”

    Stockpiles. Yeah, right, Gadjo.

    2
    September 8, 2022
  14. Gregg Thurman said:
    Yeah right, that “old” chip is still two years more advanced than the competition.

    2
    September 8, 2022
  15. John Konopka said:
    Regarding killer features, after some reflection, I think the killer feature may be the the video camera. Better low light performance and Action mode (steady cam performance for smooth videos) may prove to be most popular. Satellite connection is very cool and futuristic but most people won’t use it. Millions of people take videos of birthday parties, family gatherings, dinner parties, children, pets, etc. Usually the indoor shots have iffy lighting and the cameras are handheld by inexperienced people who just dearly want to capture some emotional moment. Word of mouth about how well this works may drive sales.

    2
    September 8, 2022

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