Apple faces competing dynamics as it gears up to reveal the pricing of the new iPhone 16 models
Apple will debut its new iPhones at a Monday event.
One of the most exciting days of the year for Apple Inc. investors is just around the corner.
The company is gearing up to show off its new iPhone 16 models at a Monday event carrying the tagline: “It’s Glowtime.” That kicks off at 1 p.m. Eastern time and can be streamed virtually through Apple’s site.
Apple’s iPhone business has seen sluggish growth trends lately, and investors are hopeful that the new devices will catalyze interest, potentially ushering in a “super cycle” of upgrades. Whether that happens may be less dependent on features announced Monday and more dependent on a factor Apple’s already revealed: Only owners of iPhone 15 Pro models — and presumably these new iPhone 16 devices — will be able to make use of the Apple Intelligence software features previewed back in June.
The big unknown coming into Apple’s event is how the company will price its new models. Apple generally has been reluctant to raise prices in recent years, with one exception, and another year of steady prices could help spur greater uptake, provided Apple is able to sell customers on the new artificial-intelligence capabilities.
But given the potential cost requirements of the hardware to support new AI features, some may think that Apple needs to hike prices to protect its margins.
Pricing
Once again, the most important thing Apple announces at Monday’s event could be the price of the new devices.
That’s especially the case as many feature updates seem to have already been reported, and Apple itself has already previewed artificial-intelligence software upgrades that will be available on the new devices.
But the pricing story could be more interesting for Apple this year. The company effectively increased the base price of the Pro Max version last year when it dropped the cheapest prior storage configuration, but it’s otherwise been holding prices steady for years. Last year, many on Wall Street were expecting more of an across-the-board price-hike strategy. Would that be a good thing this time around?
Piper Sandler’s Matt Farrell isn’t so sure. “From our perspective, any price increase could be viewed as a negative to the potential ‘super cycle,’” he wrote in a recent preview.
Apple will have to battle competing issues as it determines its pricing move. The enhanced internal hardware needed to support greater AI functionality could necessitate higher consumer prices, he noted. But at the same, there are “signs that consumer discretionary spending could be starting to crack.”
The products themselves
Once again, look for Apple to debut four new iPhone 16 models at Monday’s event: a Pro, Pro Max, Plus and base-level phone.
For fans of the Pro, Apple could be planning a larger screen size, BofA analyst Wamsi Mohan wrote recently. The current version has a 6.1-inch screen, but that could go up to 6.3 inches with this year’s iteration.
He also expects “slimmer display bezels, improved thermal management and new colors” to be among the design improvements made this year.
But software increasingly rules the show at Apple, and investors will likely see teasers of AI functions that Apple debuted at WWDC in June. For what its worth, owners of the iPhone 15 Pro lineup will also be able to tap into those features, but owners of other older iPhones will need to upgrade if they wish to take advantage.
“We expect the event to focus on AI integration and enhancements to Siri, including better integration with Apps and an updated interface,” Mohan wrote. “Apple could also demo its integration with ChatGPT for more general queries.”
And the day likely won’t be all about the iPhone, since Apple could show off new Apple Watch Series 10 and Ultra 3 devices as well.
Carrier subsidies
Another unknown is how wireless carriers will respond to the iPhone launch, but investors may have just gotten a subtle signal that they may be especially included to induce purchases.
Verizon Communications Inc. announced Thursday that it plans to buy Frontier Communications Parent Inc. in a play on the theme of convergence, or bundled wireless and fiber offerings.
“One way to view this is that cable/telco/fiber/wireless is getting more
competitive, and that’s helpful to Apple,” Rosenblatt’s Barton Crockett wrote recently. “To that end, the idea of a possible AI super cycle for smartphone sales is intriguing.”
If consumers end up liking what they see from Apple this launch season, that could mean more upgrades — and more opportunities for carriers to poach customers from their rivals.
That could bring “more focus potentially on handset subsidies,” something he said executives from AT&T Inc. and Comcast Corp. signaled could happen, when speaking at recent fireside chats.
BofA’s Mohan anticipates “at least a similar level of promotions as last year.”
How will the stock react?
Investors typically “sell the news” come iPhone launch time. But things might be different this season, according to BofA’s Mohan.
“Past events have seen the stock pull back after the event, only to recover 30-60 days post-event,” he wrote. “If Apple surprises with a compelling demo of Apple Intelligence/third party integrations or with any price increases, we could see the stock fare better than post-past events.”
Apple’s stock rose 8.3% the day the company introduced the original iPhone, but price movements have been a lot more muted besides that one. Apple shares lost 1.7% on last year’s iPhone announcement day, and they’ve averaged a 0.3% event-day return historically, according to Dow Jones Market Data.
Launch date
For investors running models of their own, the iPhone launch date is always important as it indicates how much of a shipment window there will be in the September quarter.
Mohan, for his part, notes that a Sept. 20 launch date would mean nine shipment days in the September quarter and be similar to what was seen last year.
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