Apple ()
So now we know. Apple (AAPL) has sent out invitations for an “event” on September 12, which will presumably include the launch of the new iPhone. There had been a lot of speculation as to the date, with rumors of construction delays at the new campus leading to suggestions that the launch may be delayed, but that is seemingly not the case.
As usual though, the bulk of the rumors and speculation about the launch have not been about the date but about what the new phone will look like and what the main changes and features will be. Edge to edge display including a digital rather than physical home button to enable it, wireless charging, and all-glass construction are some of the expected changes derived from a combination of leaks and logic.
For traders and investors, however, what really matters is how the stock will react, both in the run-up to the launch and after the event.
The evidence from past launches is somewhat mixed. In the early stages of the iPhone, every incremental change was viewed as a major breakthrough, and as rumors began to circulate around this time of year the stock generally appreciated. There then often followed a “buy the rumor, sell the fact” pattern that saw the stock lose ground after the facts were known.
The last couple of launches, however, have been less predictable and have been more correlated to the prevailing sentiment about the stock than to what features were anticipated in the new phones.
With AAPL trading at all-time highs, it would therefore, based on the most recent evidence, be logical for the stock to appreciate in the run up to this year’s event, but that may not be the case. This time, along with speculation about the look and features of the phone there has been a lot said about another subject - price.
The new phone is expected to be priced at around $1,000 and that psychological level has many worried that sales will disappoint. What that argument ignores is that not many people part with cash for their phone upgrade. They pay in installments on their bill, and look at the cost as something like “ten dollars more per month than I am paying now.” That attitude makes a new look and new features seem cheap.
Still, over the next week and a half, that fear will hold back enthusiasm for the stock, and we could see AAPL decline as the launch approaches. If that is the case, it should be taken as a buy signal, because there is one reliable pattern in the pre-launch price action over the years. I referred earlier to the “buy the rumor, sell the fact” effect when sentiment was bullish going in, but the same effect happens in reverse when pessimism abounds.
The above is a three-year chart for AAPL with each candle representing one week. The shaded areas are the weeks running up to a launch event and the weeks immediately following. As you can see, in 2015 the stock climbed in anticipation then fell back, while last year the opposite was true. When expectations going in are high, actuality tends to disappoint but when they are low, things don’t look as bad when the facts are known. That is human nature, and as such it is unlikely to change.
The message for those looking to buy AAPL is therefore clear. If the stock drops over fears about pricing as September 12 approaches, you should be buying on the dips. If, however, we go in strong, waiting for the drop back that follows the news makes sense.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
