Apple stock drops after the release of the new iPhone

The highly anticipated Apple event saw the launch of the iPhone 16 series on September 9, 2024. It introduces new lineups of the iPhone 16 and iPhone 16 Pro with significant upgrades to their chips, the A18 and A18 Pro, new displays, and a camera feature.

The optical zoom on the Pros has been increased to 5x, and a new tetra prism lens system allows for even wider views. Apple has announced updates to the Apple Watch Series 10 and release dates for iOS 18 and other software updates.

These updates are critical in this competitive market because they improve performance, camera capabilities, and display quality. Apple’s latest A18 Pro chip and picture innovations, Samsung’s enhanced zoom and Dynamic AMOLED screens, and Google’s Tensor G4 chip with AI-powered photography all respond to consumers’ desire for better tech experiences. By addressing these key areas, each brand hopes to attract tech-savvy customers, differentiate itself, and strengthen its market position.

Apple’s Annual Product Launch Monday failed to capture the hearts of investors, as shares of the world’s largest company fell during the event, which was largely focused on previously announced artificial intelligence features for iPhones.

Apple stock dips after iPhone 16 launch, but growth is expected ahead

Following the much-anticipated event, shares of the tech titan’s stock fell less than 1%, while the benchmark S&P 500 rose about 1%. Apple’s stock has fallen in recent days, along with other tech stocks, but it is still up more than 10% for the year.

Morgan Stanley analysts noted that Apple’s stock price has historically underperformed the market on the day of an iPhone launch event. Growth is expected “as the introduction of the iPhone 16 and Apple Intelligence helps to unlock pent-up demand,” based on analysts.

Prior to the opening of the US stock markets on Monday, Apple stock was trading at $221.20, up 0.17%. On Friday, the stock fell 0.70% to $220.82.

Stock reactions to past iPhone launches

This “sell-the-news” effect, in which a stock price rises in anticipation of a major event and then falls once the event occurs, is common in financial markets. This can happen when investors buy a stock in anticipation of an event, causing the price to rise, only to sell after the event is confirmed, causing the price to fall temporarily.

Apple’s stock has historically shown significant volatility around releases, reflecting this effect. For example, in the run-up to the release of the iPhone 6 in 2014, Apple’s stock surged from around $100 to well over $120 as investors waited with bated breath. It initially rose in 2017 following the official launch of the iPhone X, but eventually fell due to supply chain constraints. Whereas the iPhone 12 launch drove Apple stock from about $112 to over $140 in 2020, the iPhone 13 release resulted in a less dramatic increase: from about $145 to more than $170 in 2021.

These movements show how investors’ expectations and hype can influence the stock market in the short term. While Apple’s stock tends to experience a “sell-the-news” dip following an event, the long-term trend is typically very positive, with continued revenue increases while the company is successful in introducing new models and keeping customers interested.

Why traders should care about this event’s impact on stocks

The iPhone 16 launch is a critical event for Apple that traders should monitor closely, as it has a direct impact on the company’s revenue and stock performance. Increased sales of the iPhone 16 can have a significant impact on Apple’s revenue in several ways.

Premium models, such as the iPhone 16 Pro, have higher prices, which means more revenue per unit sold. Furthermore, frequent upgrades encourage current users to replace older models, resulting in an increase in overall sales.

Aside from direct sales, Apple gets value from its ecosystem, as higher iPhone sales frequently result in increased demand for accessories such as the Apple Watch and AirPods. The launch also boosts revenue from services like iCloud and Apple Music, as users are more likely to spend money on Apple’s ecosystem after purchasing new devices.

This event is critical for traders because it not only highlights Apple’s product innovation but also has an impact on the company’s long-term financial performance. Investors should monitor how the market reacts to new features, pricing strategies, and consumer interest, as these factors have a significant impact on Apple’s stock valuation and future revenue projections.

While the iPhone 16 launch offers significant growth potential, there are risks that highlight the importance of being cautious. Traders should be aware of external economic factors, competitive pressures, and operational challenges that may affect both short-term sales and long-term stock performance. Balancing these risks and potential rewards is critical for making sound investment decisions.

Is it time to buy Apple stock?

The decision to invest in Apple stock is based on your investment strategy and risk tolerance. Apple has been an excellent company for long-term investors due to its consistent innovation, strong financial health, and market position. The release of the iPhone 16 may increase revenue growth due to higher ASPs, whereas an active ecosystem binds users to its products and services.

Historically, Apple has continued to innovate in areas such as hardware integration and even artificial intelligence, sustaining growth and positioning it as one of the most promising long-term investment opportunities. Apple is constantly releasing new exciting products, which has resulted in good market performance and investor returns for many years. However, past performance can’t predict future return on investment.

Short-term investors can expect volatility around the release of the iPhone 16. The stock may fluctuate in response to market conditions, such as consumer demand, sales figures, and broader economic trends. Despite additional risks such as supply chain issues, competitive pressures, and economic uncertainty, Apple’s stock has historically been resilient, frequently recovering and outperforming in the months following major product releases.

Short-term investors should expect price fluctuations, but they can also enjoy Apple’s long-term trend of post-launch strength, which may provide a potentially attractive return on investment if properly managed.

Disclaimer: This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.