All eyes were on Apple Inc. (NASDAQ:AAPL) Wednesday, as the company’s annual fall event in San Francisco revealed the highly anticipated iPhone 7, in addition to the second generation of Apple Watch. Consumer chatter ran rampant during and after the event, along with speculation about what the reveals mean for Apple stock.
Historically, Apple stock tends to end in the red the day of its big reveal. With that in mind, the fact that AAPL shares were flat on the day of the Apple Event is perhaps a small victory in itself. (Then again, institutional investors were selling Apple stock for just about all of the second quarter, so perhaps the damage was just already done.)
It’s less promising when you consider that another publicly traded company did jump — and not just a little bit — in the wake of Apple’s event. Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) shares gained almost 30% Wednesday thanks to the announcement of Super Mario Run, which will run on Apple’s iOS.
As I’ve mentioned several times before, Apple’s center-stage status in the world of tech can breed distraction for investors assessing AAPL stock. Everything about Apple gets put under a microscope at these events. But another thing I will continue reiterating is that for Apple, the biggest factor right now is the smartphone upgrade cycle. That’s the main reason this event was important.
With that in mind, the main question is whether or not the iPhone 7 is going to drive more consumers to the new model. Monitoring social media, I found many were impressed with the new dual camera, expressing that the camera is the feature most likely to drive an upgrade. That’s promising.
The lack of the headphone jack, however, is the wildcard. Apple claim that the change is “courageous” was widely mocked, reminding us that the removal of a staple feature is a big risk. While an adapter makes it so users can still plug in standard headphones through the charging port, that could be problematic for folks who need to juice their battery while jamming out or talking on the phone using headphones.
If the user experience is negative enough, this reveal could actually be an explicit reason not to upgrade. And that worries me. All in all, my feelings are that the reveal left us with a level upgrade playing field. For every user that is drawn by the camera, there’s a good chance one will be turned off by the lack of a headphone jack.
Christopher Mims of The Wall Street Journal did make a key point in assessing the upgrades, though: While these are all small changes, it’s the small changes that have led to biggest innovations. And not just for Apple; smartphones have been the foundation for countless disruptive industries.
With that in mind, my goal here is not to write off the upgrades that Apple is touting. Instead, it’s simply to remind folks to keep a close eye on what changes are actually good for Apple stock. Enabling the enterprise and in turn enabling new industries doesn’t help AAPL stock. But impressing consumers to the point that they will trade in their current phone for the iPhone 7 definitely does.
Keep an eye on the reviews and folks begin to try the new camera and lack of headphone jack. They’re small details. But in this case, they could make all the difference.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
