iPhone 8 Rumors
Many are speculating that Apple Inc.’s newest iPhone this year could symbolize a significant makeover to the current device’s design.
Recent unconfirmed reports are indicating that the upcoming iPhone 8 may have an edge-to-edge OLED 5.8-inch display, the lack of a home button, 3D facial-recognition features, wireless charging, integration of Touch ID into the display, and a cost that would go over $1,000.
A major makeover like this could easily seek a monster upgrade cycle, similar to massive growth in iPhone sales fueled by the iPhone 6 and 6 Plus release almost three years ago in 2014.
Nonetheless, a total overhaul is likely to happen with the highly-awaited Apple flagship device. Should investors take that as a cue to take on a Buy stance, or should they wait for confirmed reports instead of relying on speculations?
iPhone growth robust despite an outdated form factor
To many analysts, AAPL remains an attractive stock to them—not necessarily because the iPhone 8 might present the first major redesign to the iPhone in three years. It’s because even with an outdated form factor, iPhone sales are still growing; Apple’s core iPhone business has already set concrete trends working in its favor, with or without a total makeover for the next iPhone.
Apple’s 2016 iPhone 7 and 7 plus broke from the consumer electronics titan’s tradition of redesigning the flagship device’s form factor every other year. Both retained the same general design as 2015’s iPhone 6s and 6s Plus and 2014’s iPhone 6 and 6 Plus.
Yet, despite the lack of any significant changes in form, iPhone sales hit an all-time high in Apple’s most recent quarter. In the company's first fiscal quarter of 2017, iPhone revenue and units climbed 5% year over year.
This further bodes well for the strength of Apple’s core business. If the company can continue increasing iPhone units and revenue in its critical holiday quarter with a three-year-old form factor, Apple’s iPhone business may be better off than what most investors realize.
Strong pricing power
As a proof of Apple's influence on its customer base, patrons are paying more for iPhone than ever before. The company has sustained offering higher-priced options for its customers by launching Plus versions of its iPhones, offering higher storage tiers, and by raising the price of the said devices—and Apple customers don’t seem to mind.
In its first quarter earnings release, the iPhone's average selling price reached a record high of $695, up from $691 in the same quarter in the previous year and higher significantly from $637 three years ago.
This remarkable pricing power guarantees for the premium price Apple customers are willing to pay for an iPhone.
Influence on customer base
Additionally, Apple has always placed customer satisfaction at the top of its priorities, which continues to pay off. According to the latest data from 451 research, the company’s CFO, Luca Maestri, mentioned in Apple’s most recent earnings call that iPhone users had a 97% overall satisfaction rate in the US, and 99% satisfaction for users of iPhone 7 Plus.
The level of satisfaction cited makes it unlikely that iPhone owners will ever be switching to another brand. Customers seem quite willing to purchase an iPhone more than ever as well, as CEO Tim Cook stated in the recent earnings call that the absolute number of iPhone upgraders and the number of buyers switching from another smartphone both notched at a record peak.
Apple's conservative price-to-earnings ratio of merely 16.4 and a healthy iPhone segment alone seems like a reason to place a Buy position on Apple stock. Regardless of a potential significant redesign to the iPhone 8 and a monster upgrade cycle, Apple has been performing well since the most recent quarter and is recommended by many analysts. These rumors, should they be confirmed, are just merely the icing on the cake.
The AAPL stock finished Tuesday’s session with a 0.72% or 98 cents increase to $136.70. In premarket hours, it dipped 0.27%.
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