iPhone SE Huge for Apple Inc.
You probably know about the ongoing battle between Apple Inc. (NASDAQ:AAPL) and its defiance to allow the FBI the necessary backdoor code to gain access to an “iPhone” belonging to one of the San Bernardino terrorists. But that’s not the only thing driving AAPL stock.
While CEO Tim Cook has waged a fierce battle to protect the security features of the company’s most valuable asset that has made it a half-trillion-dollar company, the share price of Apple stock has also been quietly ramping higher on the chart. You could have bought AAPL stock at the $93.00 range in January and February but the stock price has ratcheted up to the current $105.00 or 13%.
AAPL stock had been stuck in a tight range between $92.00 and $95.00 in the first two months of the year as investors and the stock market were growing increasingly concerned. Data pointed signs of slower iPhone sales along with lagging growth in its “Mac” and once-dominant “iPad” that are both facing increasing pressure from the Microsoft Corporation (NASDAQ:MSFT) “Surface” tablet/laptop.
The fear was that Apple was being valued as a technology commodity stock with lower multiples versus fast-growth plays found in social media and the Internet. The trading action of AAPL stock is its linkage with new iPhones, namely the next “iPhone 7,” which will need to be much better to fend off the new Samsung phone and a host of “Android”-powered phones from around the world.
But while the stock market anxiously waits for news of when to expect the next-generation iPhone, Apple has been delivering some positive news that I feel could help jumpstart the share price back towards to the historical high at $134.54 in April 2015.
Chart courtesy of www.StockCharts.com
This Will Make Apple Great Again
A surprise announcement was the “iPhone SE,” which is essentially a four-inch display version of its powerful “iPhone 6” series. The fact that the SE will incorporate the same 64-bit “A9” chip is impressive, especially since it is at a much lower price point starting at $399.00. Add in faster speeds, extended battery life, an excellent camera, and 4K video, along with its new “Touch ID” to work with “Apple Pay,” and you have an awesome product.
What impresses me is the fact Apple appears to be willing to accept lower margins on these phones in exchange for bigger volume makes for a bullish thesis. I have said for some time that Apple needs to launch lower-priced smartphones for the domestic and emerging markets to drive usage and worry less about making more margins on unit sales. Tim Cook finally appears to be doing just that.
The reality is there are tens of millions of smartphone buyers who do not or cannot afford the cost of the core iPhone series. The SE will likely grow new markets around the world, especially in the highly price-conscious emerging markets. The iPhone SE is a game-changer for Apple.
Apple needs to continue to sell hundreds of millions of its iPhones and bring all of these users to its growing ecosystem of products including music, movies, the ”Apple Watch,” and Apple Pay. By doing so, AAPL will greatly ramp up revenues from its other sources. Apple Pay, for instance, will now just require your fingerprint to buy goods on mobile sites without the need to enter a credit card. There are over two million retailers accepting Apple Pay and it will only get bigger with its launch into China and its massive consumer base.
While Tim Cook fights the FBI, he continues to adapt to the changing smartphone landscape, which will likely maintain Apple’s position as the best of breed in mobile.