The stock fell more than 3% Tuesday mid-afternoon to $121 share after having risen 6% Monday in anticipation of an iPhone 12 launch expected to generate strong iPhone demand for the next year or so. Many agree the stock’s valuation at Monday’s close was fairly overstretched and with investors well aware the iPhone 12 would likely be 5G-powered, Apple did not boast enough new innovation on the new model to justify where the stock was trading.
Management noted the higher internet and download speed in various crowded locations on the 5G-enabled new phone.
Investors are banking on iPhone revenue growth in the low to mid-teens in percentage terms in 2021, partly on the back of strengthening smartphone demand, driven by an industry-wide shift to 5G-enabled devices. Apple needs to meet expectations not only to uphold the currently lofty valuation, but also to continue building the foundation to long-term estimates for services, which is Apple’s primary driver of earnings growth.
"The iPhone 12 basically had the features we were expecting, so no surprise there," said Daniel Martins, TheStreet's Apple Maven and Founder of DM Martins Research. Positively, "I was pleased to know that at least two of the models will be available for order this week and delivery next, which was a concern in my mind since we have the Thanksgiving holiday," Martins added.
Plus, it is possible that the higher speed of the 5G system will make access to services easier and could provide upside to services estimates.