Apple is anticipated to introduce a foldable iPhone on Wednesday during its annual product launch event. Although consumer enthusiasm is high, Wall Street remains skeptical about the announcement’s potential impact on the stock price. Despite the market buzz, investors do not expect a significant price movement, with some even anticipating a sell-off. “I wouldn’t expect the stock to move much following the announcement,” stated Michael Khouw, a YieldMax strategist at Tidal Financial Group. “Historically, it doesn’t.”
A “Sell-the-News” Event? Bank of America analyst Wamsi Mohan suggested that the product launch could trigger a “sell the news” reaction, a phenomenon where shares climb prior to an announcement but decline once it is made public. “Will investors ‘sell’ the launch event once again?” Mohan questioned in a Tuesday client note. “Apple shares have frequently demonstrated a modest ‘sell the news’ reaction immediately following product launches.” Mohan’s data indicates that the stock declined the day after 10 of the 24 Apple product launches since 2007. Shares remained flat on five occasions and rose the following day on nine others. However, over a longer horizon, Apple shares tend to gain momentum, posting gains 60 days after 17 of the 24 launches.
Market Drivers On Wednesday, the stock’s reaction may hinge on announcements regarding anticipated price increases, commentary on projected demand for the rumored foldable device, and updates on Apple’s integration of large language models. “What’s happening with Apple AI?” asked Paul Meeks, head of technology research at Freedom Capital Markets. “A highly expensive foldable phone doesn’t excite me. Samsung has had one for years.” Laura Martin of Needham also raised concerns about the rumored foldable phone’s price point, citing higher memory costs amid surging demand. “We are concerned about its price point and volume limitations given rising memory prices and advanced-node supply constraints,” she noted in a client report. Martin added that valuation upside will largely depend on commentary from Apple CEO John Ternus regarding “products that will drive a near-term iPhone replacement cycle.”
Regarding price hikes, analysts believe Apple must increase prices by up to $100 to preserve profit margins, a move the company’s brand can justify among consumers. “We estimate an additional memory cost of USD 100 to 150 per smartphone. Therefore, we expect Apple to raise prices by at least USD 100,” Nicolas Cote-Colisson of HSBC wrote on Tuesday. “We believe Apple’s brand possesses significant pricing power.”
Investment bank MoffettNathanson analyzed the material input costs for foldable phones in a Tuesday note, concluding that the device must be priced near $2,500 per unit to boost margins. “Comparing the bill of materials cost to expected iPhone Ultra pricing of $2,000 to $2,500, we can see that the iPhone Ultra will either be slightly dilutive to standard iPhone product margins if priced at the low end of the expected range, or accretive if priced at $2,500,” Craig Moffett wrote to clients. “This pricing approaches the cost of a baseline MacBook Pro,” Moffett added.
