For the past couple of years, there has been a battle between Apple stock (AAPL) - Get Apple Inc. (AAPL) Report bulls and bears around one key topic of conversation. The former have argued that 5G technology would bring about a period of increased demand for products like the iPhone 12 and 13. The latter, on the other hand, have been skeptical of the idea.
Today, the Apple Maven looks at reports showing that bulls may have been right all along about the so-called “5G super cycle”, and that Apple investors stand to benefit.
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Bulls have been proven right
Wedbush’s Dan Ives has been a proponent of the super cycle theory for as long as I can remember. He talked about his thesis in more detail during a conversation that he had with the Apple Maven, a couple of months ago:
“What the Street underestimates is how massive and elongated this super cycle is. If you look at it, we still have 25% of the base that has not upgraded their iPhones in the last three and a half years.”
Fast forward to today, Mr. Ives estimates that orders for the new iPhone 13 have been about 20% higher than those of its 2020 predecessor, the iPhone 12. Worth noting, last year’s model seems to have been a success, with holiday period and fiscal Q2 revenues climbing YOY by a jaw-dropping 17% and 66%, respectively.
Credit Suisse’s Mathew Cabral, one of the few analysts who do not have a buy rating on Apple stock, also sees strength in iPhone 13 demand. According to the Wall Street expert, “wait times for the Apple iPhone 13 family continue to track longer than comparable models last year, with all SKUs seeing waits over one week”.
Evercore ISI’s Amit Daryanani went further and asked 5,000 consumers about their intentions to buy this year’s version of the iPhone. His conclusion is that demand has been higher now than during the pandemic-stricken year, in part due to the higher-end 1T memory trim and carrier rebates. As a result, the analyst believes that the iPhone’s average selling price will rise by $14 YOY to $852 in fiscal 2021.
All the above has been ratified by UBS’ David Vogt. The analyst believes in upside to his unit sales and selling price estimates. Supporting his conviction is evidence from the bank’s proprietary Evidence Lab Access Dataset.
(Read more from the Apple Maven: Apple Stock: Rough September Can Be Great For October Returns)
The Apple Maven’s take
From the above, Apple investors have reasons to celebrate. First, the iPhone super cycle seems to be playing out as bulls expected, which itself is good news. But more importantly, despite the evidence that Apple’s core business remains healthy, Apple stock continues to trade 9% below September’s peak.
Therefore, due to a combination of strong business fundamentals and de-risked valuations, the Apple Maven continues to believe that AAPL is a good play at current levels.
Regarding the iPhone’s so-called “super cycle”: do you think it is currently playing out, as many bulls believed would be the case prior to last year?
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)