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Apple (AAPL) Sep 12 Event Preview: iPhone XS, Watch 4 & More

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Apple (AAPL - Free Report) is all set to kick off its mega event of the year on Sep 12. The company will host the event at its new Steve Jobs Theater in Cupertino, CA-based headquarter.

The much anticipated event is likely to see Apple unveil a plethora of new devices including iPhone XS, Watch 4 and an updated iPad Pro.

Let’s delve deeper into what to expect from the event.

Three New iPhones to Strengthen Portfolio  

Apple is expected to launch three new iPhones this year, per Bloomberg.

The company is anticipated to unveil an upgraded iPhone X powered by Apple’s latest A12 chip with a 5.8-inch OLED screen. This will ensure faster processing speed and better camera performance. The device is expected to be called iPhone XS, per 9to5 Mac. A gold version is likely to be available this year along with the gray and silver versions.

Apple is likely to launch a bigger phone “iPhone Xs Max” that is expected to have a 6.5-inch display, almost an inch larger than the iPhone 8 Plus screen.
 

Apple Inc. Price and Consensus

Apple Inc. Price and Consensus | Apple Inc. Quote

 

The third phone is expected to be the cheaper version this season with a 6.1-inch LCD display. This phone is anticipated to be named “iPhone Xr.” Goldman Sachs analyst prices this device at around $849, slightly higher than iPhone 8’s price slate of $699-$799 depending on screen size.

Apple’s fortunes are tied to iPhone, which is by far its biggest revenue contributor. The device accounted for 56.1% of net sales in the last reported quarter, when the company sold 41.3 million units of iPhones. Although the company sold only a few hundred more iPhones than it did a year ago, segment revenues were 20% higher. This was primarily due to 19.5% boost in iPhone ASP, which was $724 in the quarter.

However, Apple continues to lose smartphone market share. Moreover, Huawei recently toppled it to become the #2 smartphone seller globally.

The three new devices promise strong growth prospect for Apple, prior to the upcoming holiday season. Although none of the devices will be completely new like iPhone 6 or iPhone X, the upgraded internal features are expected to attract new customers. Further, unflinching loyalty for iPhone and higher ASP are key catalysts.

Moreover, they are likely to boost Apple’s competitive position going forward.

Apple Watch Likely to Steal the Show

Apple’s fast growing smartwatch is expected to hog limelight this year. If the leaked images are to be believed, the company is likely to launch a larger screen edge-to-edge Apple Watch, which will provide more information to users.

The redesign is expected to boost Apple’s dominant position in the wearables market. Per market research firm IDC, the company has beaten the likes of Xiaomi, Fitbit (FIT - Free Report) and Garmin (GRMN - Free Report) to maintain its lead in this rapidly growing market in the second quarter.
 

 

Apple’s market share of 17%, up 400 basis points (bps) on a year-over-year basis was much better than Xiaomi’s 15.1%, Fitbit’s 9.5% and Garmin’s 5.3%. While Xiaomi gained 180 bps in market share, Garmin and Fitbit lost 10 bps and 330 bps, respectively.

Apple Watch grew 38.4% year over year and the company shipped 4.7 million units. Apple Watch is a part of Apple’s Other Products (7% of sales) group that also includes Apple TV, Beats products, iPod, and Apple-branded and third-party accessories.

Total revenues from wearables, which include Apple Watch, Beats and AirPods, increased more than 60% year over year in the last reported quarter. Apple Watch grew in the mid 40% range. We expect an upgraded Watch 4 to drive top-line growth much faster in the upcoming holiday season quarter.

Notably, Apple recently stated that additional U.S tariff on Chinese import will hit Apple Watch. Consequently, pricing of the new Apple Watch will be of significant interest as the device has become the fastest growing product line in Apple’s portfolio. However, a higher priced Watch can make it challenging for Apple to maintain its lead in the intensely competitive wearable market.

Apple to Unveil Updated iPad Pros

Moreover, Apple is highly anticipated to unveil an updated iPad Pro, which might offer a lifeline to this slowing device line. In the last reported quarter, the company sold 11.55 million iPads, down 5% year over year. Revenues (8.9% of sales) of $4.74 billion also decreased 5% year over year.

Notably, in March this year, the company launched a new iPad. Per Bloomberg, Apple might unveil two new iPad Pros with “slimmer bezels and Face ID instead of the home button and fingerprint sensor.” The devices will possibly have screen sizes of 11-inch and 12.9-inch.

The updated iPad product line is expected to improve Apple’s competitive position, particularly in the EdTech industry, which is currently dominated by Alphabet’s (GOOGL - Free Report) Chromebook and Microsoft (MSFT - Free Report) .

AirPods, AirPower Wireless Charger, Mac mini & New MacBook

Apple is expected to bring upgrades to Airpods, its wireless earphones. This is another product line, which the company believe will be affected by additional U.S. tariffs on Chinese imports. The company is also rumored to announce the availability of its AirPower charging mat in the show.

Moreover, it’s expected that Mac Mini and MacBook will get updates this time. Apple is likely update Mac mini that doesn’t have a screen, mouse or keyboard. Reportedly, the company will launch a new cheaper laptop with a 13-inch retina display to succeed the MacBook Air.

In July, Apple upgraded MacBook Pro with features that include larger memory (up to 32 GB) and storage up to 4TB, better system security powered by the T2 chip, and a “third-generation keyboard” for “quieter typing.”

Per Bloomberg, the new range of laptop will be targeted toward consumers looking for lower-priced Apple laptops as well as educational institutions, which buy products in bulk. Notably, Apple’s Mac unit sales declined 13% year over year to 3.72 million in the last reported quarter.

Currently, Apple sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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