Apple Shares Gain Ahead Of Launch Event, But New iPhones Expected in October

The Apple Watch, as well as the iPad Air, are likely to take center-stage at the tech giant's launch event in California Tuesday, with new 5G iPhones expected to be unveiled in October.
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Apple Inc.  (AAPL) - Get Report shares jumped higher Tuesday ahead of the tech giant's annual product launch event in California that, for the first time in more than a decade, isn't expected to include any new iPhones. 

Apple is expected to unveil new versions of its Apple watch, as well as updates to its iPad line-up and new software release dates, at the virtual event that will broadcast live from the Steve Jobs Theater on the Apple campus at 10:00 Pacific time. Supply chain disruptions in Asia, as well as the broader consumer impact of COVID-19, will likely mean Apple won't reveal its latest suite of 5G-capable iPhones at Tuesday's event, with analysts expecting a separate launch in October ahead of the holiday season.

"We update our model for stronger than expected demand for all things Apple—notably laptops and iPads—due to continued work/school from home dynamics," said Oppenheimer analyst Andrew Uerkwitz, who lifted his 12 to 18 month price target on Apple to $125.00 with an outperform rating. 

"Additional catalysts include an iPhone cycle that we expect will support 5G. While we do not expect a "super cycle" by any means, share gains are possible being early in the cycle with 5G, Huawei leaving the market, and previous dampened Wall St estimates due to COVID-19," he added.  

Apple shares were marked 1.9% higher in early trading Tuesday to change hands at $117.84 each, a move that would put the stock some 8% south of the level it traded prior to the four-for-one split that took place on August 31.

Last week, Japan's Nikkei Asian Review said Apple is preparing to begin production on its range of 5G iPhones later this month, a decision that would narrow delays in production and potentially available for large-scale buying into the holiday season.

Goldman analyst Rod Hall cautioned last week that Apple's sales and earnings momentum were not strong enough to justify its current valuation, and “aren’t consistent with the narrative that has driven the stock to its highest premium vs. the S&P 500 since 2011,” and that other tech giants like Amazon  (AMZN) - Get Report and Microsoft  (MSFT) - Get Report “are delivering the numbers and yet are valued at about the same multiple as Apple.”

Apple said earnings for the three months ending in June, the group's fiscal third quarter, rose 25.9% from the same period last year to $2.58 per share, well ahead of the $2.05 per share Street consensus forecast. Group revenues rose 13.4% to a Street-beating $59.7 billion, Apple said, with gains in every geographical region and across all product line.

iPhone revenues rose 2% from last year to a forecast-beating $26.4 billion, despite the COVID-19 headwinds, thanks in part to a solid debut for the $399 iPhone SE, which was launched earlier this year. iPad and iMac sales, meanwhile, rose 22% and 31% respectively as work-from-home shifts powered computer purchases. Services revenues were pegged at $13.2 billion, just shy of Apple's recent record and up 15% from last year.

Apple declined to offer a near-term profit forecast, "given the uncertainty around the world' and the ongoing COVID-19 impact, but noted that it expects to see continued gains for the iPhone, despite likely delays of "a few weeks" for its iPhone 12 launch in September.