Despite redesign and 5G, this analyst doesn't see a super-cycle starting for the Apple iPhone
Many investors see good times ahead for Apple. The company produces the top-selling smartwatch in the world (in fact, it happens to be the number one watch in the world), the top ear-worn headphones, and the number one smartphone in the world. Today, Apple's shares soared $8.68 (or 2.33%) to set a new all-time closing high at $381.37. That is just 13 cents shy of the all-time intra-day high of $381.50 set today. On March 23rd, just when the coronavirus was becoming a serious matter, Apple plunged to a closing price of $224.37. Since then, the tech giant has seen its shares rise by $157 or an amazing 70%. The company is valued at more than $1.65 trillion dollars.
Do the redesign and the inclusion of 5G support guarantee that an iPhone super-cycle is coming?
Some of the optimism surrounding Apple has to do with the company's first 5G phones set to be introduced as soon as September. It also will be a redesign of the iPhone line with the rounded sides of the current models replaced by the flat sides that made the Apple iPhone 4 and iPhone 4s two of the best designed iPhone models of all-time ("like a beautiful old Leica camera" said the late Steve Jobs of the iPhone 4). Since the iPhone 6 line, Apple has used rounded corners for its handsets. But when it comes to those flat bands we can quote the late, great Karen Carpenter who sang, "they're back again, just like a long lost friend" although we're pretty sure that she wasn't singing about the look of the new iPhones.
Will these four models kick off a super-cycle for the iPhone?
Between the redesign and 5G, Wedbush analyst Daniel Ives said that last month that Apple will benefit from the tailwinds created by a new iPhone "supercycle." He pointed out that the supply chain has recovered from issues caused by the pandemic thus putting "Cook & Co. back in the drivers seat to launch this 5G cycle in this typical September time frame." He also called the redesign and the development of four new 5G iPhone 12 models "the perfect storm."
Not every analyst is calling for a super-cycle. According to SeekingAlpha, earlier this week Nomura's Jeffrey Kvaal said that the 5.4-inch iPhone 12, 6.1-inch iPhone 12 Plus, 6.1-inch iPhone 12 Pro, and 6.7-inch iPhone 12 Pro Max will "fall short of a super-cycle." His evidence for being a "negative Nellie" includes his data indicating that Apple has asked its supply chain to ship enough components to produce 80 million iPhone 12 series units for the second half of this year. That figure, he notes, is at the bottom of the 80 million to 85 million iPhone 11 series units that Apple asked for last year. In other words, where's the beef growth? And Nomura expects Apple to actually ship 65 million to 70 million handsets from the iPhone 12 family during the second half of this year.
A report from the Nikkei news agency last week said that thanks to the pandemic, Apple is facing a delay between four weeks and six months in starting mass-production of its first 5G iPhone models. Nomura sees any delay running no longer than four to six weeks which still could allow Apple to sell millions of units to holiday shoppers. And the securities firm says that Apple could "run the supply chain full tilt" in order to "shave weeks from the launch delay."
If there are any headwinds facing Apple, they could be related to the financial problems that many are running into-especially in the U.S.-following the COVID-19 outbreak. In the states, the number of new cases each day has risen to a number that would fill Yankee Stadium. With millions of Americans losing their jobs, it might be hard for some to rationalize spending so much money on a new iPhone. Hopefully, Apple recognizes this and prices the 2020 models accordingly.
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