Apple Launches New Watch and iPad at Annual Event
We recommend prospective investors wait for a wider margin of safety before investing in Apple.
On Sept. 15, Apple (AAPL) held its annual product showcase where it announced the launch of a new Apple Watch and iPad. The iPhone was notably absent from the event, as COVID-19-related delays have pushed back the launch of Apple’s crown jewel to October. On the services front, the firm detailed its Apple One offering that bundles iCloud, Apple Music, TV+, Arcade, News+, and Fitness+ for $29.95 per month (and a skinnier version without Fitness and News at $14.95). We expect the firm to continue pushing the “as-a-service” model for both its products and software to solidify its recurring revenue streams. Our fair value estimate remains $71 per share for the firm. While narrow-moat Apple remains well positioned in the near term given the upcoming 5G iPhone and stronger outlook for Mac and iPad segments due to the ongoing work- and learning-from-home dynamics, we recommend prospective investors wait for a wider margin of safety before investing in Apple.
The Apple Watch Series 6 was the first product discussed, with the most noteworthy feature being its ability to measure blood oxygen levels using both red and infrared light. The new watch includes a new S6 processor with up to 20% faster performance relative to the prior generation. The price point is the same as the last variant: starting at $399 with the cellular model at $499. Similar to the cheaper iPhone SE, Apple also announced an Apple Watch SE starting at $279. We expect these new products to help Apple sustain its recent stretch of double-digit wearables growth.
On the iPad front, the firm updated its entry-level variant starting at $329 as well as the iPad Air with its latest A14 Bionic processor (made on TSMC’s 5-nanometer process) and starting at $599. In addition to the normal performance hike (40% from prior generation), Apple is also embracing USB-C for its charge port (similar to the iPad Pro).
|Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.|
Abhinav Davuluri does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.