Apple (NASDAQ:AAPL) took it on the chin during September’s tech stock selloff. In just one day, AAPL stock dropped 8%, knocking $180 billion off the company’s market capitalization — the biggest single-day loss for any company, ever.
The slide also cost Apple its coveted $2 trillion market cap status. With AAPL now down around 15% from its September 1 high and a new 5G iPhone 12 announcement anticipated in the near term, is now the time to buy Apple stock?
On the surface, it makes sense that AAPL would surge after the iPhone 12 is announced. And that could happen any day now. But I would wait. History has shown AAPL rarely sees gains following a new iPhone announcement.
Instead, investors inevitably feel let down after the pre-launch hype, and Apple stock tends to stay flat or even lose ground.
The key is the rebound: things change a few months later, once consumers start snapping up the newer iPhones.
iPhone Sales Power Apple Stock and 5G is Coming
It’s no secret that the dramatic rise of Apple stock over the past decade plus has been directly related to one product: the iPhone. In 2018, with signs that global demand for iPhones was beginning to falter, the company made the decision to stop breaking out iPhone sales numbers. That didn’t go over well with shareholders, but Apple has stuck with it.
Since then, the percentage of revenue being generated by iPhone sales has been on the decline as other divisions like Services gain momentum. That being said, the iPhone is still huge for Apple. In its most recent quarter, iPhone revenue of $26.42 billion was double that of the next largest division — Services at $13.2 billion — and 44% of the total pie.
Where things get exciting in 2020 is the arrival of 5G. Apple has lagged other smartphone manufacturers like Samsung in offering 5G support, but the iPhone 12 will change all that. That’s raised expectations that the iPhone 12 will be a monster seller.
Multiple generations of older iPhones could be traded in to get the high-speed upgrade. In August, a Wedbush analyst told MSNBC that 350 million of the 950 million iPhones currently in use globally “are in the window of an upgrade opportunity.” This could result in an upgrade super-cycle.
Apple is being more cautious, reportedly ordering 75 million iPhone 12 units for 2020, in line with last year’s iPhone launch.
But even holding steady when other manufacturers are seeing smartphone shipments continue to slide would be a big win for Apple, and is liable to boost AAPL stock.
Historically, Launch Hype Often Falls Flat
The thing with the iPhone’s effect on the price of APPL shares is that the launch events often have the opposite effect you would expect. On occasion, Apple stock gets a mild bump immediately after a launch event, but the more common market reaction is indifference or worse.
The problem is that AAPL tends to rise in anticipation of the big annual iPhone event, fueled by rumors. When Apple actually announces new iPhones, there’s typically a bit of a letdown. Warranted or not, the effect can be quite pronounced. In the 24 hours after the iPhone 5C and iPhone 5S were announced in 2013, AAPL dropped 5%. The iPhone 7 launch event in 2017 resulted in a 3% drop.
In contrast, 60 days after the launch, the results are more typically a sizable gain for AAPL. Once consumers are seen snapping up the new iPhones, doubts are replaced by optimism.
It’s not a rule, but history shows the real boost to Apple stock as a result of a new iPhone launch kicks in the quarter after the launch event.
Bottom Line on AAPL Stock
AAPL is an ‘A-rated’ stock in my Portfolio Grader, and a worthy pick for your portfolio. The question is whether to buy now on the dip, or wait until after the iPhone 12 reveal. That largely depends on whether you think the tech sector stocks will recover between now and whenever Apple holds its iPhone 12 launch event — at this point, it’s looking like October.
A lot could happen over the next three to four weeks (including Tuesday’s Apple Watch 6 event), so it’s possible that AAPL stock could bounce back in that time. InvestorPlace contributor Nicolas Chahine makes a strong case for buying shares during the current dip.
That said, if you’re waiting for the 5G iPhone 12 launch to trigger an Apple rally, history says that the 24 hours after the company’s iPhone event is the time to pull the trigger.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
