5G networking, bigger screens, a new upgrade cycle. Those are some reasons Apple’s product launch today could be huge.
Tim Cook, CEO of the world’s most valuable company, is expected to unveil four new versions of the iPhone 12 at 1pm ET today. Prices will reportedly start at $699 for a 5.4-inch version. The largest 6.7-inch “Max” model will cost $1,099.
There could be other enhancements like better facial recognition and longer battery life. But these may be the key issues for investors:
- New iPhones could trigger an upgrade cycle
- An upgrade cycle could boost supplier stocks
- 5G networking could go mainstream
New IPhones Could Trigger an Upgrade Cycle
AAPL fans might remember how the iPhone 6 in 2014 drove record demand for handsets over the following two years.
More recently, the company has shifted away from selling huge numbers of devices in favor of services. That let Cook’s team squeeze more revenue out of its existing user base. It’s also delighted analysts and investors by making AAPL into more of a software company, lifting its valuations and stock price.
While that vision of AAPL as a software-and-services company has worked for the last year, it’s come under attack by publishers like Epic Games and antitrust lawyers in the House of Representatives. That’s why an iPhone 12 could be such a big deal. It could give the company a new narrative, turning it back into a mass-volume story.
Analysts have already been making the case. Morgan Stanley’s Katy Huberty, one of the most prominent AAPL experts, said “we expect this fall’s launch to be the most significant iPhone event in years.” She sees unit sales up 22 percent to 220 million.
Dan Ives at Wedbush thinks at least 350 million old iPhones are ripe for replacement. “It translates into a once-in-a-decade-type upgrade opportunity,” Dow Jones quoted him saying.
An Upgrade Cycle Could Boost Supplier Stocks
More iPhones manufactured would mean more volumes for parts like semiconductors, cameras and screens. Several companies could potentially benefit.
Skyworks Solutions (SWKS) generates about half its revenues from AAPL. Its chips help translate between radio signals and sound.
Qorvo (QRVO), which makes radio-transmitter chips, gets about one-third of its sales from AAPL. Demand was strong enough a month ago for management to unexpectedly raise its guidance. They cited strong demand for “advanced 4G and 5G mobile products.”
Qualcomm (QCOM) is a key supplier of 5G modems.
Marvell Technology (MRVL) is a potential beneficiary because of its partnership with Taiwan Semiconductor (TSM). The companies are working on super thin, power-efficient 5G chips.
5G Networking Could Go Mainstream
5G emerged as a big story last year. The advanced technology could increase network speed by 50-100 times.
It hit some speedbumps along the way. President Trump took actions against Chinese networking company Huawei and coronavirus delayed upgrades. Many 5G stocks have drifted in the meantime. But what if iPhone mania revives the excitement?
Investors may watch these names:
KeySight Technologies (KEYS): A provider of testing equipment used for building 5G networks.
Ciena (CIEN), Viavi (VIAV) and Lumentum (LITE): These companies supply fiber-optic cable, which helps link 5G transmission bases.
American Tower (AMT), Crown Castle (CCI) and SBA Communications (SBAC): These companies control most of the locations for wireless towers.
II-VI (IIVI): A provider of communications equipment, including fiber optics.
Moving Beyond Coronavirus?
Today’s event could also “get things back to normal.” We’ve lived most of 2020 under the cloud of coronavirus. The crisis not only shut down travel and retail. It also lifted a new universe of idiosyncratic stocks like Zoom Video Communications (ZM) and vaccine makers.
But a new iPhone mega-story could blow all that away. It could help spur a new wave of infrastructure spending and tech investing. Coincidentally, Amazon.com (AMZN) holds its Prime Day at the same time. The pandemic had delayed both events.
Then we get a heavy flow of earnings — including AAPL on October 29. After that, it’s a straight shot into the holiday-shopping season.
In a few months, who knows? We might look back at today as the moment when coronavirus finally slipped into the rearview mirror. If any company can pull that off, who better than AAPL? (With some help from AMZN?)