Apple: High Marks for the Next Rollout

10/18/2019 5:00 am EST


Michael Murphy

Editor, New World Investor

Michael Murphy, editor of New World Investor, has long been one of the market's leading experts on technology. While he often follows lesser-known, under the radar stocks he also has some well-known large cap favorites, including Apple (AAPL).

Apple rose after Nikkei reported that the company is increasing iPhone production by as much as 10%. Some analysts believe the prospect of a 5G iPhone in 2020 will make for an off-year for iPhone sales.

Others point to better camera quality and a budget model that’s $50 cheaper than the iPhone XR was can win buyers over, and it looks like they are right.

Nikkei said the company is working to increase iPhone 11 production by between seven million and eight million units. One source was quoted as saying the company now hopes to produce more phones in this generation than it did for last year’s models.

That’s up from Apple’s previously conservative estimates. The demand is centered on its budget iPhone 11, which starts at $699, and the iPhone 11 Pro, which starts at $999, according to the report.

The Canaccord Genuity analyst reiterated his Buy rating and raised his price target from $240 to $260. He said Canaccord’s North American survey work suggests the iPhone is maintaining its leading market share among customers of all four major wireless carriers, and “With the stronger than anticipated initial sales for the launch of this year’s iPhone lineup, we believe the September quarter results could come in at the high end of guidance.”

He said the initial numbers are particularly encouraging given concerns that users would wait for 5G models to upgrade. In addition, investors have been worried about the potential negative impact the trade war would have on demand in China.

He raised his September quarter iPhone unit sales estimate from 41 million to 43 million and his full-year 2019 and 2020 unit sales estimates from 180 million and 198 million to 182 million and 200 million, respectively.

In its latest list of the best smartphones currently available, Consumer Reports gave the #1 slot to the iPhone 11 Pro Max, with the iPhone 11 Pro coming in #2 out of the Top 10 phones in its rankings.

The iPhone 11 Pro Max was given high by marks for its improved battery life. Consumer Reports said that a fully charged iPhone 11 Pro Max ran for 40 ½ hours when a robotic finger put it through a range of standard, everyday consumer activities such as making calls, Internet browsing, using GPS navigation and taking pictures.

They said that the battery of the iPhone 11 Pro ran for 34 hours when put through a similar set of tasks. The iPhone 11, which was #8 in the rankings, ran for 27 ½ hours on a fully charged battery.

With regards to the phones’ cameras, they said that the three-camera setup on the back on the iPhone 11 Pros “looks like the top of an electric razor or Mickey Mouse,” but got some of their highest scores for phone-camera quality.

They also gave the new iPhones high marks for durability, with the iPhone 11 and iPhone 11 Pro Max each making it through being dropped 100 times from a height of 2 ½ feet with just “minor scratches.” However, the iPhone 11 Pro suffered a broken screen and stopped working after being dropped just 50 times.

Apple just bought Ikinema, a 13-person animation company that does 3D motion capture technology. They can change video footage of people into animated characters for movie special effects.

Apple will use this to translate a user’s facial expressions to a digital avatar in an augmented or virtual reality environment. Customers will have immersive video chats in virtual reality with avatars. Take that, Samsung!

AAPL is a Buy on any dip under $210 for new iPhone rollouts and augmented/virtual reality products. I think the stock can get to $250 in 2019.

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