Apple – Nothing burger

A gesture, some silicon and a bit of camera.

• When the most exciting new feature is a gesture for the Apple Watch, it is clear that the new iPhone offers minor incremental upgrades over the iPhone 14 that are unlikely to kick start the replacement cycle that is needed to bring Apple back to growth.
• Apple launched the iPhone 15, the Apple Watch 9 and the Watch Ultra 2 all of which are incremental upgrades on their predecessors and offer very little that is unlikely to cause anyone other than the hardcore fanbase to rush out and buy a new device.
• Instead, I suspect that most of the buyers will be owners of iPhone 12s and older where the battery has worn out or performance is starting to suffer and where an upgrade to the iPhone 15 represents a substantial improvement over the model they currently have.
• However, what Apple has managed to do is launch enough new stuff to keep its premium position in the market that also allows older products to become cheaper meaning that it can chip away at the high-end of the Android market.
• Apple has been doing this to great effect and the next 12 months promise to deliver more of the same.
  • First, Apple Watch 9 & Ultra 2, which sport better silicon for performance and battery life as well as slightly better screens.
  • The highlight of the new product is without doubt the new gesture control where alarms, timers, phone calls and reminders can be actioned simply by tapping the forefinger and thumb together twice.
  • The new silicon enables analysis of blood flow to accurately detect this gesture which is why the user has to action the gesture twice to get it to work.
  • This is a cool and useful new feature but not a must-have that would drive users to upgrade more rapidly than they otherwise would.
  • Second, iPhone 15 and Pro, where the premium features of the iPhone 14 Pro have trickled down into the mainstream iPhone 15 and where incremental upgrades have been made to the iPhone 15 Pro.
  • These include new silicon for better performance and battery life as well as a titanium case for lighter weight and smaller bezels to allow the same size screens to result in a slightly smaller overall device.
  • The iPhone 15 Pro has the same 48-megapixel camera, but the sensors have been tweaked to improve performance and low-light photography.
  • The iPhone 15 also makes the long-awaited jump to USBC for charging and data transfer, but I do not think that this will drive upgrades.
  • Almost everyone who will buy this product already has an iPhone and so will already have the lightening port accessories meaning that this could represent an inconvenience rather than a benefit.
• The net result is that this event was one of the most inconsequential for some time and comes at a time when Apple needed to pull something out of the hat.
• As I said last year and the year before, Apple has done enough to hold its position but not enough to trigger a major upgrade cycle that would bring the market back to growth.
• Hence, I think that the outlook for Apple and the smartphone market more generally remains the same where consumers tend to hold onto their phones longer before replacing them.
• This is a factor of both inflation and the “cost-of-living crisis” as well as the fact the new devices offer very little that is new or different from the devices that were launched last year.
• Apple’s shares are a little bit more reasonable than they were at FY2024 PER of 26.7x but this is still a lot to pay for a company where growth is hard to come by.
• There remain much better places to look such as Qualcomm (in which I have a half position) which trades on half the multiple and has a better long-term growth story in my opinion.