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Apple Inc AAPL

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Apple Launches 5G iPhone As Expected; Other Enhancements Relatively Lackluster; No Change to FVE

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

On Oct. 13, Apple held its annual product showcase, where the firm announced the launch of four new iPhone models: the iPhone 12, iPhone 12 mini, iPhone 12 Pro, and iPhone 12 Pro Max. All devices in the “12” family are 5G-compatible. The base iPhone 12 model was priced at $799, which is $100 more expensive than the equivalent iPhone 11 launched in 2019, which we attribute to the costly 5G modem and RF content. Taking the $699 slot is the smaller iPhone 12 mini with a 5.4” screen. While we suspect the 5G capability and updated cameras (the Pro variant boasts a LIDAR scanner to autofocus in low-light) will be major draws for many customers, we think market expectations for iPhone sales in the coming quarters may be too aggressive. We are maintaining our $71 fair value estimate for narrow-moat Apple, and we view shares as overvalued at current levels.

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Company Profile

Business Description

Apple designs a wide variety of consumer electronic devices, including smartphones (iPhone), tablets (iPad), PCs (Mac), smartwatches (Apple Watch), and TV boxes (Apple TV), among others. The iPhone makes up the majority of Apple’s total revenue. In addition, Apple offers its customers a variety of services such as Apple Music, iCloud, Apple Care, Apple TV+, Apple Arcade, Apple Card, and Apple Pay, among others. Apple's products run internally developed software and semiconductors, and the firm is well known for its integration of hardware, software and services. Apple's products are distributed online as well as through company-owned stores and third-party retailers. The company generates about 40% of its revenue from the Americas, with the remainder earned internationally.

One Apple Park Way
Cupertino, CA, 95014
T +1 408 996-1010
Sector Technology
Industry Consumer Electronics
Most Recent Earnings Jun 30, 2020
Fiscal Year End Sep 28, 2020
Stock Type Cyclical
Employees 137,000