Apple Has Unveiled the iPhone 16, and This Is Why Investors Aren’t Impressed
Apple (NASDAQ: AAPL) recently unveiled its new iPhone 16. The launch of the latest iPhone is often a much-anticipated event for Apple fans, who are eager to see what the changes will be to the newest device. But the company hasn’t always delivered much on that front, sometimes relying on modest incremental improvements, such as enhancing its cameras and offering new colors.
While investors saw this latest launch as an opportunity to help sell consumers on new artificial intelligence (AI) features, it appears as though the company’s newest iPhone may be underwhelming, yet again. Here’s why it wasn’t all that impressive, and what it could mean for the stock.
There may not be enough of a reason to upgrade
The latest iPhone will have improved battery life, a better camera, and a new button that will make it easier to access the camera. Arguably, the most important enhancement is an upgraded A18 chip, which will enable users to access Apple Intelligence. However, users who have the iPhone 15 Pro will also be able to access the new AI features in Apple Intelligence.
And because some AI capabilities will run through the cloud and not just on the phone, it’s possible other phones may be able to utilize AI features as well. Unfortunately, not all AI features will be available immediately as the rollout of Apple Intelligence will likely span until next year.
Ultimately, with AI capabilities being the main reason for upgrading the phone, it may be a tough sell for the company to get consumers to upgrade their iPhones. Creating images and using a digital assistant to help with day-to-day tasks and writing, for example, are features people can readily access via ChatGPT and other chatbots; users don’t need to upgrade their phones for those types of features. Apple missed an opportunity to unveil a game-changing AI feature that could have created a significant need for its users to upgrade their iPhones. And that could be a sign that it may not have one.
This could lead to some underwhelming quarterly results
There was a hope among investors and analysts that this unveiling could have led to a big upgrade “supercycle.” But aside from the most avid Apple fans or those who are concerned about privacy related to AI, there may not be enough of a reason for many users to justify upgrading their devices. Users craving AI features may simply opt to use a chatbot like ChatGPT that they can access via the web.
A lack of significant upgrades to the iPhone shouldn’t come as a huge surprise to consumers or investors at this point. Modest cosmetic changes have been the norm for Apple in recent years. However, with the economy not in terribly great shape right now, this latest iPhone may not do the company any favors at a time when it needs a growth catalyst.
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Apple’s iPhone revenue makes up half of the company’s overall revenue. For the nine-month period ending June 29, iPhone sales came in at just under $155 billion and were down 1% from the same period a year ago. Apple needs strong iPhone sales to really move its top line, and this latest iPhone may not provide the company with the catalyst it needs to do that.
Should you buy Apple stock today?
Investors don’t appear impressed with the iPhone unveiling as the stock was down in recent days. Its year-to-date returns are positive at around 12%, but that’s below the S&P 500’s gains of around 18%. If you’re willing to hang on for the long term, Apple can still be a good stock to buy right now, despite trading at 34 times its trailing earnings, which may look expensive when you consider its growth challenges right now.
Apple still has a strong customer base, and while this latest iPhone may not trigger a huge wave of upgrades, that doesn’t mean users will hold on to old phones forever. For now, investors who want to buy the stock will likely need to be patient because if you’re expecting a quick surge in price due to the launch of the latest iPhone, you could very well be disappointed. But if you’re willing to hold for the long haul, this can still make for a solid investment to put in your portfolio.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.
Apple Has Unveiled the iPhone 16, and This Is Why Investors Aren’t Impressed was originally published by The Motley Fool
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