When it comes to innovation, there are few companies that can compete with Apple (NASDAQ:AAPL). The tech giant’s ability to incorporate novel technology in its products has made the company’s stock one of the most popular investments on the market. AAPL stock currently makes up 6.7% of the S&P 500 which is a huge feat for a company of its size.
Hence, it comes as no surprise that investors weren’t too pleased when the company’s big product unveiling last week did not feature a new iPhone. The hype around 5G had many investors and buyers hoping for the release of Apple’s new iPhone that incorporates this technology. But the company known for its “one more thing” moments during product reveals, left investors yearning for more.
AAPL stock did see a decline in its share price following the event but we recommend holding on to this stock as its new products show some major upside potential.
AAPL stock falls after the big reveal
At its highly-anticipated reveal on Tuesday, Apple revealed a number of exciting new hardware products and a subscription service but the star of the show AKA the iPhone did not make an appearance. While this was a letdown for investors, Apple’s new product lines are still a major game-changer for the company.
The highlight of the reveal was Fitness+, Apple’s new subscription service. With gyms closed for the foreseeable future, the new service is Apple’s answer to the at-home gym. It allows users to access new online workout classes each week for just $9.99 a month and has fitness giants like Peloton (NASDAQ:PTON) at the edge of its seat.
But Apple’s most spectacular reveal was its Apple One bundle. The package includes the best that Apple has to offer wrapped into a single service. This includes TV+, Music, Arcade and iCloud which you can buy for just $14.99 a month. Users also have the option to buy a bundle with the fitness service as well.
The goal behind Apple’s new services is to make sure its users stay as connected as possible during the pandemic. But the company’s bundles have received backlash from its peers who claim that tech giant is using its dominant position to ensure that customers never leave the Apple ecosystem. Packaged software could hurt companies like Spotify (NYSE:SPOT) that only provide music services.
But what about the iPhone?
Apple’s new packaged software is definitely an enticing deal but the revenue from these products only makes up three-quarters of iPhone sales. The highly-anticipated 5G iPhone model did not make an appearance during the reveal and left many investors discouraged.
However, Apple is known for revealing products closer to its shipping date experts believe that iPhone designs were likely delayed due to the pandemic. The final product will be completed by late October which could mean that an unexpected product reveal could be in the works.
The iPhone has always been and dominant product and with Apple’s value now up to a whopping $2 trillion, there is a lot of pressure on the company to deliver. The company’s stock increased by 57% in 2020 and investors are hoping for some big gains from the sale of the new iPhone.
However, the AAPL stock pullback may just be a response to the initial reaction of the product reveal. Looking ahead, Apple One will make the company a major player in both the media and fitness space. Companies like Peloton and Spotify stand to lose some market share to the tech giant.
So is AAPL stock still a buy?
Apple’s big product launch was missing its star but this in no way diminishes the allure of this company’s stock. AAPL stock is still trading at 32 times forward earnings and remains one of the top stocks to buy on the S&P 500.
Analysts remain optimistic about the future of Apple stock as well. Laura Martin, an analyst at Needham increased the stock’s price target from $112.50 to $140. She believes that Apple One has the ability to overpower other standalone brands in the market. Other analysts share Martin’s sentiment as well. Katy Hubert of Morgan Stanley believes that Apple One and Fitness+ could boost Apple’s service revenue.
Apple is a company that was built on innovation and its recent product launch is proof of this. Although the iPhone has always been its bestseller, the Apple One and Fitness+ service pose a major threat to other companies in the industry as Apple stands to gain a greater share of the market. There is a good chance that these services could boost AAPL stock in the coming months.
Stay invested in this tech stock despite the current pullback.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.
