Apple Inc. {AAPL} has moved lower in the days since they announced their new series of iPhones. There have been a few theories why that is and while I don't pretend to have all the answers I'm gonna throw out my theory on what's at least part of the problem.
I have an iPhone 6 or 6s. You can see a picture of it above. I bought it three years ago and it was state of the art. I upgraded the memory since I use it for business and paid I think $699 for it plus tax. That iPhone was the first I bought where a substantial part of the price of the phone wasn't subsidized by my carrier like it had been in the past. Yes, they gave me some small deal but the majority of the cost fell on me. For the first time I became aware that I was paying what amounted to the cost of a cheap laptop for the privilege of carrying around a mini-computer in my pocket.
I have managed to drop this phone more than all my others combined. A particular bad fall out hiking in the summer of 2016 led to a cracked screen which I've been dealing with ever since. You can see the cracks in the screen above. I could have fixed it for about $100, but since it didn't really bother me and it worked, I decided to leave it alone. I could have also replaced it as my contract with my carrier was up but I gambled that I could wait about a year or so for whatever the next generation of wonder products Apple was sure to bring out. Besides upgrading to the iPhone 7 meant that I'd have to buy a pair of the wireless ear buds as the ear phone jack is now gone. Those look like they're begging to be lost about the first time I wear them or set them aside and while I know that eventually I'll have to bow to the inevitable, I'd look to put that off as long as possible.
I've won my gamble with time. My iPhone 6 or 6s has made it to this year's anticipated new rollout. After three years it's going to be time for me to upgrade to a newer generation of product......except I'm not excited about any of the new phones. Yes they offer a faster processor and it's my understanding the screen's are going to have better resolutions and colors. I know the phones have a better camera {the one on my 6 is pretty decent though} and if I want to splurge for facial recognition in the iPhone X it's there. Apple is betting on augmented reality being the next big thing and I know that at least the X will give you that. Time will tell but it wouldn't surprise me if augmented reality at least initially goes the way of the 3-D television.
For me, and I'll guess millions of folks like me, all the things I need my iPhone to do it now does. What I really need Apple to develop is a method of projection so that it's not so hard for my 57 year old eyes to see on the little screen. I don't care how big you make the phone, you can't make the screen in a practical manner big enough that it still functions as a phone and older folks can comfortably view it. That this isn't being offered tells me that either it's too expensive or not available given today's technology. All the rest of the bells and whistles on the new phones are in my opinion "nice to have" sort of things but they don't move the needle enough for me to run out there and be the first in line to upgrade. They're to me incremental upgrades, not "wow I gotta have this!" improvements.
Now I think Apple is going to sell millions of phones in this cycle if for no other reason than all the folks like me that need a new phone. These things are built to last it seems maybe three years and while I won my bet from last year it's time for a replacement. Only I don't know which phone that's going to be. For me the X is out. I can't justify paying that sort of money for what to me are unnecessary improvements, albeit likely cool improvements. They say the processor on the 8 and the camera are the same as the X and so far for me that looks like the way to go.
But I just might go with a 7 given it's price and what I need it to do. That makes me wonder how many of us are going to feel the same way. If Apple sells more of the 7s than thought and more users vote for the 8 over the X what does that do for Apple's margins? How does that affect Apple if consumers consistently going forward opt to hold their phones longer and buy last year's model when they upgrade? I don't know of course but I wonder if that sort of thinking may be what's hit Apple's stock since they announced the new phones. It may not be much of a wrinkle in the long term investment thesis and Apple's still going to make a boatload of cash from these new phones. But for the first time that I can remember Apple announced new products and consumers yawned. We'll have to see if this is a long term event in terms of consumer behavior or if I'm wrong about what may be going through consumer's heads. I'm pretty sure it's been a short-term concern in the minds of traders in Apple's stock.
And I'll let you know what I decide to do when the time comes. I may just hang on to my 6 until it gives up the ghost.
Back Thursday.
*Long Apple in a few accounts who have wanted to own the shares and asked us to purchase the stock for them. Apple is a component in many ETFs we own in client and personal accounts. I have no opinion on Apple's investment merits and write about it in this blog solely for the purpose of discussing it's current short-term weakness. Therefore, nothing in this post should be taken as either an explicit or an implicit recommendation regarding Apple's stock. You should do your own research or have a discussion with you investment advisor before making any decisions regarding the company's shares.
