Apple Inc. (AAPL) Stock Is a Keeper, Even After Lackluster iPhone Launch

Everyone was looking forward to the new iPhone 8 and 8 Plus from Apple Inc. (NASDAQ:AAPL). After introducing the two phones, AAPL unveiled the iPhone X.

All of them are gorgeous devices, without a doubt. But not everyone is onboard with upgrading. I was like many others, holding onto an iPhone 6, waiting for something to really change my mind. I thought, if the 8 is amazing, I will get it. If it feels “meh” I’ll buy the 7 which will now be at a discount. While demand is “off the charts” for iPhone X so far, the 8 isn’t looking too hot.

Apple’s iPhone 8

Like many others, I thought the 8 and X would lead to an iPhone super-cycle. It still probably will. But in the short-term, there could be some struggle. In the fiscal third quarter, the iPhone 8/8 Plus represented just 16% of sales, according to surveys. Consider that the 7/7 Plus represented 43% of sales in a similar period, while the 6/6 Plus stood at 46%. Because the iPhone X was not available, this could lead to a disappointment in sales, earnings and margins in the short-term.

The jump from the 6 and 6S to the 7 was notable. But the improvements from the iPhone 7 to iPhone 8 aren’t, really. The 8’s processor is faster, supports (but does not come standard) with wireless charging and it has some cool photo software. But the battery life, camera quality, weight and size don’t really improve from the 7. Plus, a lot of people remain skeptical of the 8’s glass back as opposed to the metal backing of the 7.

In all, why pay $699 for an iPhone 8 if you can get the very similar iPhone 7 for $549? Further, for a similar price to the iPhone 8, consumers can get the 7 Plus, or the 7 with more memory.

Decluttr, a technology recycling site, has already noted a sharp increase in iPhone 8/8 Plus trade-ins. This is unusual, given that the device just came out. Admittedly though, Apple also doesn’t typically release a standard, plus and super model in the same cycle, either. It’s good news in that there is obvious pent-up demand for the more expensive iPhone X. It’s bad news in the sense that these consumers are finding that the iPhone 8 (apparently) wasn’t worth the purchase.

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iPhone X

While there are risks with the iPhone 8, the iPhone X looks promising. With a starting price target of $999 and obvious demand for the new device, Apple’s average selling price (ASP) should be elevated quite a bit.

The risk here is that the iPhone 8/8 Plus is a dud, from a sales perspective, as consumers opt for either the iPhone X or the iPhone 7/7 Plus. Perhaps between the low-priced iPhone 7 and the high-priced iPhone X, these ASPs will still drift higher over time. In fact, they very well should move higher given that a $999 iPhone (starting price) has never been available.

Source: investorplace