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Stock Analyst Update

Apple Launches 5G iPhone As Expected; No Change to FVE

We believe shares are overvalued for this narrow-moat tech company.


On Oct. 13, Apple (AAPL) held its annual product showcase, where the firm announced the launch of four new iPhone models: the iPhone 12, iPhone 12 mini, iPhone 12 Pro, and iPhone 12 Pro Max. All devices in the “12” family are 5G-compatible. The base iPhone 12 model was priced at $799, which is $100 more expensive than the equivalent iPhone 11 launched in 2019, which we attribute to the costly 5G modem and RF content. Taking the $699 slot is the smaller iPhone 12 mini with a 5.4” screen. While we suspect the 5G capability and updated cameras (the Pro variant boasts a LIDAR scanner to autofocus in low-light) will be major draws for many customers, we think market expectations for iPhone sales in the coming quarters may be too aggressive. We are maintaining our $71 fair value estimate for narrow-moat Apple, and we view shares as overvalued at current levels.

Battery life continued to expand, thanks to the new A14 Bionic chip, which is manufactured on TSMC’s 5-nanometer process technology that leverages EUV lithography. For the A14, Apple claims a 50% performance advantage over any other competing mobile chip, though we were surprised by a lack of color on power efficiency. For 5G, the firm claimed up to 4Gbps download and 200Mbps upload speeds in ideal conditions. We doubt most users will experience these speeds anytime soon, as the 5G ramp is still in the early innings.

The iPhone 12 Pro and 12 Pro Max will start at $999 and $1,099, respectively, in line with the starting prices of their equivalents from 2019. The Pro models both feature larger screens than their predecessors, with the Pro and Pro Max going from 5.8” and 6.1” to 6.5” and 6.7”, respectively. The Pro has three cameras (ultra-wide, wide, and telephoto), with the Pro Max having even better cameras. The emphasis on camera features is consistent with other Android-based smartphone vendors that have been also adding additional cameras and claiming superiority to Apple devices in the picture quality department.

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Abhinav Davuluri does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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