Buy Apple shares ahead of iPhone 14 launch, analyst says

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Anticipation for Apple’s next suite of products is high ahead of the company’s event on September 7.

Apple stock has climbed more than 15% in the past two months as investors brace for higher prices for the iPhone 14 family and speculation about new augmented reality glasses from the tech giant.

“In our view, iPhone pricing is the primary focus for investors, followed by release timing and pace and any pricing/bundling news,” Bank of America analyst Wamsi Mohan wrote in a new note to customers.

Mohan remains bullish on Apple shares at the event next month. Check out what Mohan had to say about Apple.

SHANGHAI, CHINA – AUGUST 29, 2022 – An Apple Store is seen in Shanghai, China, on August 29, 2022. Apple announced a special “Far Out” event on September 8 at 1 a.m. Beijing time. The online launch event is expected to bring new products such as the iPhone 14 / Pro Series and Apple Watch Series 8, as well as the release of the official version of iOS 16. (Photo credit should read CFOTO/Future Publishing via Getty Images )

Mohan’s call on iPhone pricing:

“In Apple’s model we assume the iPhone 14 launches at the same starting prices as the iPhone 13,” Mohan wrote. “However, in an inflationary environment, Apple could choose to raise the price of Pro models (high-end consumers less sensitive to price) and leave lower-end models unchanged.”

“If Apple raises the prices of the Pro models by $50,” Mohan added, “we estimate an EPS glider of $0.20. We’re looking at a scenario where Apple raises the prices of the iPhone 14 Pro/Pro Max by $50 each , while reducing prices for the iPhone 14 /14 Max by $50. We estimate a benefit of about $0.10 if 10 million additional iPhone units are sold.”

What Apple stock is doing on iPhone releases:

Apple has released a new version of the iPhone around the start of its fiscal year for the past 14 years. The stock posted double-digit growth for many of those years and even triple-digit growth in fiscal 2020.

Bring on the new iPhone, say Apple investors.

Bring on the new iPhone, say Apple investors. (Chart: BofA)

Mohan’s long-term thesis on Apple:

Mohan’s Buy rating on Apple is based on several factors: “1) strong iPhone upgrade cycle in FY 2023 due to need for higher connectivity to enable new AR/VR applications, 2) higher service revenue growth, 3) expectation that the multiple will rerate higher as it has been before major product launches, 4) continued strong capital returns, 5) Apple likely to charge for app and in-app purchases outside the App Store, and 6) stocks likely to outperform in a broader market down cycle.”

The Tech Industry Atmosphere:

The second-quarter earnings season for a large portion of large-cap technology companies was, at best, mixed.

Companies such as HP have warned of a slowdown in PC growth as consumers pull back on spending.

Meanwhile, Salesforce recently warned about cooling sales for enterprise customers. And companies like Snap are laying off workers en masse to combat a slowing advertising market.

From the Yahoo Finance Live archives: HP CEO Enrique Lores calls for PCs

“Well, that’s something we expected, a slowdown in the consumer, but clearly the slowdown was bigger than we expected,” HP CEO Enrique Lores said on Yahoo Finance Live after a loss in sales late Tuesday.

Brian Sozzi is editor-in-chief and Anchor on Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and up LinkedIn.

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