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Apple launch event preview

Apple will hold a launch event later today (12 September, 8PM SA time) in Cupertino, California, where the company is expected to announce three new iPhones, a new Apple Watch, new iPad Pros, new AirPods and the launch date of its AirPower wireless charging mat. Reports suggest that the company’s iPhone product lineup will include two pricier next-generation iPhone X phones (5.8-inch and a 6.5-inch) and a cheaper 6.1-inch LCD phone to replace the iPhone 8/8 Plus, with estimates that the latter device will be more affordable, with a retail price closer to $550 or $650. BGR and 9to5Mac have both reported that Apple will rename the larger model (the iPhone Plus), the iPhone XS Max. This year is a so-called “S” year for the iPhone, which in the past meant that a prior year’s models get minor changes such as camera improvements, updated internals, and previously, an “S” to their names – so it’s expected to be a year without any radical design changes to the iPhone.

In addition to new iPhones, Apple is likely to release an Apple Watch Series 4. A recent leaked image on 9to5 Mac, showed a gold Apple Watch with what appears to be an edge-to-edge display and a new watch face with eight special functions. The new watch is expected to come in two new, larger sizes, and have longer battery life, new health-tracking functions, and a faster chip.

In September, Apple usually announces the release date for its new operating systems (OS) iOS 12 (dubbed Mojave), the Watch OS 5, and tvOS 12. The new software typically becomes available in September every year. Apple may also announce when its long-awaited AirPower wireless charging pad/ mat will become available to purchase. When Apple announced the iPhone 8 and iPhone X a year ago, it gave a preview of its own wireless charging pad called AirPower – the pad is able to charge an iPhone, Apple Watch and its AirPods headphones at the same time, just by placing them on it. Apple had initially said the AirPower was “coming in 2018” and, according to a Bloomberg report, the company is aiming to launch it in September, so it’s likely the release date will be announced at the event.

Apple introduced AirPods in September 2016, and they have become one of its most popular new products. Given that it has been two years since the first generation AirPods hit stores, it may be time for Apple to release AirPods 2. Apple already announced a new AirPods case that can charge wirelessly, but other new features (water resistance, noise cancellation etc.) are still rumoured.

According to a November 2017 Bloomberg report, Apple has been working on a high-end iPad that incorporates features of the iPhone X, such as Face ID, no home button, and a near edge-to-edge display. Bloomberg wrote at the time that the iPad could be released in 2018. Apple’s most recent iPad release in April was a $330 version targeted at the education market.

While this is one of the more unlikely reports, a variety of publications have suggested that Apple will launch a cheaper, smaller HomePod. Such a move is expected to help Apple gain market share in the smart speaker space with a cheaper model. Since the HomePod’s release it has lagged companies like Amazon and Google in terms of market share.

Market commentators are also predicting a wildcard announcement on the content side, which could even be the launch of Apple’s own streaming service. Apple has been working on TV partnerships, and movie studio projects for some time now. The company has ordered several shows (and currently has nowhere to show them), with The Wall Street Journal reporting in August 2017, that Apple would invest c. $1bn in acquiring and producing original TV shows over the next year. The announcement of a streaming service would be positive for Apple with Morgan Stanley analyst, Katy Huberty writing that video will add 200bps annually to Apple’s Services segment’s revenue growth (although it will only be EBIT accretive in the long-term). The Services segment accounted for 18% of revenue in 3Q18 and is Apple’s second-biggest segment. Huberty forecasts Apple’s video offering topping 50mn paid subscribers by 2025 (currently Netflix has c. 124mn paid streaming subscribers). That growth rate implies video growing from a $500mn business in CY19 to a $4.4bn business. Huberty maintained her Overweight rating on Apple last week but raised the target price (TP) from $235 to $242/share.

Meanwhile, Bank of America believes that Apple’s new iPhones will be priced higher than expected, with analyst Wamsi Mohan saying that the new phones will start at $799 for the larger-screen LCD model, while the OLED screen X upgrades will start at $999 (the same as the iPhone X) for the iPhone XS and $1,049 for the iPhone XS Plus. Mohan forecasts that the new lineup will increase the “blended” iPhone average selling price (ASP) to $815 for FY19 (it was $724 in 3Q18).

Finally, Piper Jaffray raised its TP for Apple from $218 to $250 (c. 12% upside from Tuesday, 11 September’s close) ahead of the launch event. Analyst Michael Olson told CNBC that his research shows c. two-thirds of iPhone owners (over 500mn people) are using a model that’s at least two years old. Olson reiterated his expectation of a “super-long cycle” rather than the previous “supercycle” and sees a “multi-year move” in iPhones within the X family.



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