Briefing highlights
- Apple to unveil jazzed-up iPhone today
- What’s it mean for company and stock?
- Markets at a glance
- Trudeau, May set to talk on Bombardier
Apple Inc. is poised to test the limits of the wild popularity of the device that changed the world.
The tech giant is expected today to unveil a super-jazzed version of the iPhone as it marks the gadget's 10th anniversary. And it's expected to boast a big upgrade.
Apple hasn't actually said it's unveiling an iPhone 8. That's what everyone expects because it sent out a notice for an event Tuesday at its Cupertino, Calif., offices. And some details have leaked out, anyway, including the possible name iPhone X for a top-line model.
There has been much written and much speculation, much of it about how the new device is expected to carry a price tag of $1,000 (U.S.), which, of course, would be higher in Canada.
"A lot has been made that the next version of the iPhone, the iPhone 8, is likely to retail at around $1,000, a significant amount of money, and in most cases more than the average laptop as well as desktop PC," said CMC's Mr. Hewson.
"It is true that Apple's products don't tend to be that price-sensitive, but for a company whose margins are already quite high it still remains a big risk on a psychological basis, and in markets where consumers appear to be leaving it longer to replace what are already quite expensive pieces of hardware," he added.
"Consumers generally don't mind spending a lot of money on a decent specification laptop computer because it usually has a shelf life of more than three years, and this can be extended by replacing some of the parts, upgrading the hard drive or increasing the RAM, for example. Apple's products don't offer that sort of flexibility, and that could well limit its price appeal in some markets, even if some of the upgrades are cutting edge, and are embraced by Apple's hard-core fans."
So there's a lot riding on Tuesday's launch.
The Apple iPhone 7
Beck Diefenbach/Reuters
Apple has traditionally unveiled a "major redesign" of the phone every two years, but last time out, the iPhone 7 and 7 Plus in 2016 "'looked' very similar" to the 6 version, but for some changes that were both notable and minor, said Citigroup analyst Jim Suva.
"We believe the lack of visible changes impacted the two-year upgrade cycle for iPhone 7 and 7 Plus," he added.
Here's what Mr. Suva expects in an iPhone 8. Which at times sounds like Q explaining his latest gadget to Bond.
1: Possibly, three versions: A 4.7-inch screen, a 5.5-inch LCD version, and a 5.8-inch, organic light-emitting diode, or OLED, device. All three should boast glass casing, an aluminum frame for the first two, and a stainless steel frame for the latter. Mr. Suva expects that premium OLED version to have an average sales price of $1,000. Call it Apple (core) inflation.
2: New colours. Like red.
3: Enhanced camera capability "with dual front-end and dual rear cameras for OLED phones." (Reminds me of Q explaining the car to 007 in Goldfinger.)
4: "3D sensing for facial recognition, gesture recognition and augmented reality technology also a possibility."
5: "Enhanced touch sensitivity."
6: Wireless charging, fast charging and enhanced battery power.
7: A faster processor.
8: Greater RAM.
9: An invisible home button: "Home button and fingerprint sensor will be equipped in the centre or side-bottom area of display, adding other sensors beneath."
10: Better waterproofing.
11: Enhanced Siri and artificial intelligence capability.
12: Apple Pencil compatibility.
Mr. Suva also expects an upgrade to Apple's operating system, possibly with FaceTime for groups, and, potentially, announcements about the Apple Watch and Apple TV.
As The Globe and Mail's technology reporter Shane Dingman points out, OLED screens, facial recognition and stylus support are all technologies that have been released by Android and Windows phone manufacturers over the years. But until now, they haven't been combined into one device and branded with Apple's typical fit and finish.
Normally, Mr. Suva noted, you can get a new iPhone 10 days after such an unveiling. But perhaps not the premium model this time out.
"Given the 10-year anniversary, impressive features and longer replacement cycle of the installed base, we believe many consumers will desire the OLED version of the iPhone 8, which we do not believe will be available in material quantities until October and November (rather than September)," Mr. Suva said.
"We believe the OLED in-screen fingerprint sensor is more difficult to mass-produce with high yields, thereby making October/November mass availability likely, rather than September."
If you're an investor, and care more about the stock than the device, here are some interesting tidbits from Mr. Suva:
1: Historically, Apple shares "have tended to slightly underperform" in the month following an iPhone launch. But then they are "in line with the broader market 60 and 90 days post the announcement and outperform 180 days post the announcement."
2: Citi rates Apple shares a "buy," with a target price of $170.
3: "We continue to remain positive on Apple shares and believe Apple stock can trade higher despite the stock up 40 per cent year to date compared to the S&P 500 up 11 per cent. Yes, we believe Apple can return to sustainable growth post iPhone 8. We see growth opportunities in services (in app purchasing, Apple Pay, iCloud, Apple Care, etc.) and India, aka Applewood, as underappreciated."
"We also see Apple as a potential beneficiary if Trump's administration lowers corporate tax and repatriation rates."
There are some potential challenges, of course, among them the possibility for higher-than-expected "pricing pressure" at the top end of the market.
"Thus far, Samsung, Huawei, HTC and others have maintained fairly disciplined pricing for their high-end smartphone offerings but should these companies get more aggressive with pricing, it could create pressure on Apple and its ability for the stock to meet our target price," Mr. Suva said.
As well, people are holding onto their iPhones longer. The pace of replacing devices in the U.S., Mr. Suva noted, has climbed to up to 31 months over the past half-year, compared with two years earlier.
"We attribute this to limited upgrade features for iPhone 7/7 Plus as well as unbundling of contracts (removal of handset subsidies), resulting in iPhone buyers delaying their upgrades," he said.
As The Globe and Mail's telecom writer Christine Dobby notes, Canadian wireless carriers still offer up-front subsidies on devices, and typically require customers to put some money down, unlike in the U.S., where carriers offer financing for the full cost of devices, requiring nothing down. This could make the more expensive iPhone an even tougher sell north of the border.
So watch Apple stock during and after the launch.
"Last week we saw Apple's share price slip back quite sharply from recent record highs, and while it still looks cheap on the basis of future earnings potential, there is a risk that we could see further declines if there is any scepticism or disappointment about [today's] product announcements," said CMC's Mr. Hewson.
"For its latest quarter the company is expecting total revenue to increase to between $49-billion and $52-billion, from $45.4-billion in Q3, and it is hoped that [today's] product launch will go some way to help achieving that," he added.
Here are some other tidbits in advance of the launch, from Mr. Suva and Strategy Analytics.
1. Each change of 1 million in unit sales of iPhones affects Apple's quarterly earnings per share by 4 cents.
2. Apple is the world's second-largest seller of smartphones, with 11 per cent of the market in the second quarter.
3. The iPhone 7 was the best-selling smartphone model in the same quarter.
4. In terms of operating profit, Apple accounted for 61 per cent of the world smartphone industry, "more than the rest of the entire industry combined," said Strategy Analytics, adding that the "Apple iPhone will soon be the world's first trillion-dollar smartphone."
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