- Value Investor Daily
- Posts
- Value Investor Daily #37
Value Investor Daily #37
Apple Releases iPhone 16, What Does It Mean for the Stock?
Receive daily stock trade alerts sent directly to your phone and email.
Stay informed with timely market insights and expert analysis.
Join a community of 150,000+ subscribers benefiting from these alerts
Stay ahead of market trends and capitalize on emerging opportunities.
Apple Releases iPhone 16: What Does It Mean for the Stock?
On Monday, Apple (AAPL) hosted its annual iPhone event, revealing the AI-powered iPhone 16 lineup (and a handful of other new products). Here’s everything they announced:
- 📱 iPhone 16: Apple introduced the iPhone 16 and 16 Plus, featuring water and dust resistance, new colors, and upgraded cameras with AI-powered Visual Intelligence.
- 📷 Camera Enhancements: The iPhone 16 series has a 48MP Fusion camera and new camera control button, supporting Spatial Photos for Apple Vision Pro.
- ⚙️ New A18 Chipset: Both iPhone 16 models run on the new A18 chip, which has a 16-core neural engine, boosting performance and battery life.
- 📱 iPhone 16 Pro & Pro Max: Pro models come with 6.3” and 6.9” displays, also includes the new camera control button, Grade 5 Titanium bodies, and A18 Pro chip, enhancing speed and efficiency.
- 🎧 AirPods 4: Redesigned AirPods 4 launched with a more comfortable fit, improved audio quality, enhanced noise cancellation, and Conversation Awareness, automatically lowering volume when someone starts talking to you.
- 🎨 AirPods Max Update: Apple refreshed the AirPods Max with new colors and USB-C charging.
- 🔊 AirPods Pro Hearing Aid Features: New clinical-grade hearing aid features and a hearing protection mode coming to second-gen AirPods Pro.
- ⌚ Apple Watch Series 10: Apple unveiled its thinnest Apple Watch yet with a larger, brighter display and new health-tracking features, including sleep apnea detection.
- ⏱️ Apple Watch Ultra 2 options: No next generation was announced, but a satin black finish and new bands were revealed for the Ultra 2.
But the most crucial change was previously unveiled at WWDC in June—Apple Intelligence:
The new AI feature set includes writing tools for productivity, embedded generative AI technology (including image generation), and a much smarter Siri.
The stock (AAPL) was flat on the news, up just .04%.
What does all this mean for the share price? Will it be enough to propel the company into the AI future, or is this the end of Apple?
That may seem like a silly question, given that it’s the biggest company in the world by market cap, but we’re here to examine moats.
Will iPhone 16 lead to a “super cycle” upgrade?
Tech writer Alex Kantrowitz was unconvinced, calling for a typical upgrade cycle, not a super cycle.
He noted that the new “visual intelligence” feature, which helps you learn about your surroundings, is a Google Lens rehash.
Many new Apple Intelligence features will not be available until the software update in 2025.
He said it’s problematic for Apple’s business, given sales stagnation and weakness in China.
Will #Apple Intelligence spark a super cycle? @Kantrowitz, @BrynTalkington and Trivariate's Adam Parker weigh in on today's iPhone event:
— CNBC's Closing Bell (@CNBCClosingBell)
7:41 PM • Sep 9, 2024
But tech analyst Dan Ives disagrees. He thinks this is the beginning of the next bull phase for Apple, citing AI personalization will fundamentally revolutionize how customers use the iPhone:
The new era of personalization and how consumers interact with their iPhones has now begun; this will cause a renaissance of iPhone growth for Apple over the next 12 to 18 months and drive shares higher with a $4 trillion market cap in 2025. Raising price target to $300 🔥🐂🍎🍏
— Dan Ives (@DivesTech)
10:01 PM • Sep 9, 2024
Let’s look at the valuation:
Source: SeekingAlpha
Revenue growth has slowed to just 0.43% in the last year, compared to a 10-year growth rate of 8.03%.
EPS has grown at 10.32% YoY vs. 15.53% in the last ten years.
Analysts expect 8.6% earnings growth over the next 3-5 years.
Return on total capital is 44% vs. the 5-year average of 32%.
Cash flow was $88 billion in the last twelve months vs. long-term debt of $86 billion.
This is possibly the best-run business in the world, captained by a steadfast operator, CEO Tim Cook.
In May, the company authorized $110 billion of share buybacks.
Will the stock be higher in 10 years? Probably.
Apple has been excellent at pursuing customer feedback for years and making improvements.
So, even if the Apple Intelligence features don’t lure consumers into upgrading to the new iPhone today, they will invest heavily in the product until they figure it out.
But it’s priced to perfection, trading at 33X earnings.
Our earnings-based DCF shows a fair value of $113 vs. the current share price of $220, which is likely why Buffett recently sold half his stake.
The reverse DCF implies an 18% growth rate over the next ten years—much higher than currently expected and twenty percent higher than the last ten-year CAGR of 15%.
If EPS grows at 8.6%, using a 27x multiple (in line with 3.7%, 10-year interest rates today), it implies a $405 share price by then.
That’s a 6.29% CAGR + .44% dividend = 6.73% annualized return.
As always, please do your own research, but we would add it to the watchlist and wait for a better price.
Thanks for reading today!
Receive daily stock trade alerts sent directly to your phone and email.
Stay informed with timely market insights and expert analysis.
Join a community of 150,000+ subscribers benefiting from these alerts
Stay ahead of market trends and capitalize on emerging opportunities.