Apple: Ripe For Disappointment After WWDC
Summary
- Apple unveiled new Mac products and its mixed reality headset, Vision Pro, at WWDC, but shares pulled back from all-time highs.
- The stock may be overextended, and the Vision Pro's high price and 2024 launch date disappointed investors.
- Apple shares typically underperform during WWDC week, and the stock may face near-term technical pressure.
Andrii Yalanskyi
On Monday, technology giant Apple (NASDAQ:AAPL) kicked off its annual Worldwide Developers Conference ("WWDC"). This year's event was likely the most anticipated gathering in several years, as everyone was waiting to see the company unveil its mixed reality headset. Apple delivered its first major new piece of hardware in years, while showing off some other new products, but shares of the stock did not react well to the news. Today, I'd like to examine why that might have happened.
For those who are unfamiliar with WWDC, it's not traditionally a major product event. It's mostly a chance for management to show off new software and the brains that will enable the next generation of Apple devices. While there can be some new devices shown off from time to time, the company usually holds its flagship product launch event in September. That's when we see the new set of iPhones, as well as some other items for the upcoming holiday season.
This year's event did feature a couple of new items, primarily for the Mac line. Apple unveiled a 15-inch MacBook Air, the larger screen version of the lightweight laptop that was unveiled at WWDC 2022. The company also introduced the Mac Studio and Mac Pro, both with the powerful M2 Ultra chips. The key part is that Apple has fully transitioned to its own silicon here, moving away from Intel (INTC), which saw its shares tumble on the news.
Apple did unveil its mixed reality headset on Monday, Vision Pro, after years of speculation regarding the device. Management spent a bunch of time early on mentioning business uses. That's because the device is priced at $3,499, so it's not likely to be a mass market consumer product. Social media giant Meta Platforms (META) has a much more reasonably-priced device that has more traditional consumer appeal. Apple is partnering with Disney (DIS) for content, with Disney CEO Bob Iger appearing on stage to tout what he called "a revolutionary platform." Disney+ programming will be available on the device at launch. Apple also announced a partnership with Unity Software (U), sending shares of that company nicely higher.
Apple shares have been on a nice run so far this year. The stock actually hit a new all-time high during Monday's trading, just under $185, before pulling back. At that point, as the chart below shows, the stock was more than $16 above its 50-day moving average. This is usually where shares look a bit extended, and the rally can fizzle out.
Apple Last 12 Months (Yahoo! Finance)
At the same time, Apple may be fully valued at current levels according to the street. Going into Monday's event, the average price target among analysts was $180.48, which is pretty much exactly where Apple shares traded when I started writing this particular paragraph. This is another area where the stock has stalled out, only getting above this average valuation a handful of times in the last three years.
One of the reasons why the headset was so important for Apple was that expectations were calling for an acceleration in revenue growth later this year. Analysts were projecting Apple's top line would grow by more than 7.5% in the all-important December quarter (Apple's fiscal Q1). On one hand, last year's period was meaningfully supply constrained due to China coronavirus shutdowns. That means that the comparison bar for 2023 is lower than it might normally be. On the other hand, however, the 2022 holiday period was 14 weeks long due to how the calendar fell, so Apple will have one less sales week in this year's period. Unfortunately, the new headset won't be launched until early 2024, so that won't help sales in any calendar 2023 periods. That news sent Apple shares down more than 1% in late afternoon trading.
It would not surprise me if Apple shares see some pressure in the near term. Beyond the technicals that show the stock may be overextended, WWDC week is generally one of the worst for Apple shares. This is usually because going into the annual event, expectations are tremendously high, so not everyone is satisfied when you have so many rumors coming out beforehand. As the table below shows, the stock usually trades down during the week of the event, with a minus 2.45% average performance over the past 22 years. In the 17 years here where Apple has been down this one particular week, the average decline is nearly 4%. In 2014, the asterisk week, Apple shares were set for a 7 for 1 stock split the following week, which may explain why that week was an outlier.
WWDC Performance (Yahoo! Finance)
In the end, Apple shares pulled back from their all-time highs on Monday during the WWDC keynote. Apple did unveil some nice new Macs, and the really expensive mixed reality headset was finally shown off. The stock tumbled a little when the device's availability was revealed to come in early 2024, meaning no revenue help in this year's holiday period. WWDC week usually isn't a good one for Apple shares to begin with, and the stock was certainly overextended in the near term. This turned out to be another "buy the rumor, sell the news" event. I wouldn't rush in to buy the stock just yet, especially with another potential Fed hike coming soon, but I'll take another look at shares should they get closer to the 50-day moving average in the coming weeks.
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Comments (99)
--- Or not. That "3d-rendered demoware" was physically trialed by multiple live reporters.
Fair winds mates!
Jack
--- Apparently you didn't pay attention to the "One More Thing" in the keynote. The Vision Pro has the M2 processor, making it more powerful than any computer prior to the M-series chips and capable of complete independence from other Apple hardware... as well as near-complete integration with it as well. Try understanding the product before making assumptions about it.
--- Well, since you ask...:
• "... and the Vision Pro's high price and 2024 launch date disappointed investors."
--- How can investors be disappointed in what they don't even understand what they're looking at? They saw an announcement for a product that's completely different from what they expected. They expected something that would look and perform like the Meta Quest devices--which themselves are little more than the tethered version of 3D goggles we had 23 years ago, using grossly underpowered processors and needing huge, heavy batteries that make the headsets uncomfortable to wear at best and downright painful for some. The Quest devices use Qualcomm mobility processors that aren't even comparable to 20-year-old Pentium processors while the Apple Vision Pro is using a full-powered M2 desktop-grade processor that is far more powerful and efficient. Actual investors are NOT disappointed; TRADERS simply don't understand what they're seeing.• "One of the reasons why the headset was so important for Apple was that expectations were calling for an acceleration in revenue growth later this year. Analysts were projecting Apple's top line would grow by more than 7.5% in the all-important December quarter (Apple's fiscal Q1)."
--- You seem to be assuming that those "expectations" are impossible. Why? Just because the Vision Pro won't be available until next year? What about the new Macs? What about the new iPhone? And what about the fact that Apple is no longer "Supply Constrained"? I'd say that was an invalid assumption.• "In the 17 years here where Apple has been down this one particular week, the average decline is nearly 4%."
--- Even acknowledging the truth of this statement, what of the balance of those years? With the exception of four years out of the last 17, the year ended up HIGHER than the WWDC week and the average increase roughly 24% per year, even AFTER those declines. Were it not for those splits, Apple's stock would be almost $9,000/share. That is not a sign of weakness in the company and a big sign of a market that does not understand the company, even as it takes advantage of that company's growth. If I recall correctly, Apple was taken off the Fortune 100 because it was having an outsized effect on that market that was actually HURTING the other corporations within it.Apple cannot be estimated by outsider analysts simply because they don't understand why Apple is so successful. There are those who blame Cook for his lack of innovation while flat ignoring the growth in operations and customer base since he took over... from a couple hundred million devices to well over 1.5 BILLION devices and still growing. How? Because Apple's products are more reliable, more capable and easier to use than the competition... and always has been. Sure, Apple's VISIBLE innovation has slowed somewhat, but that's because most of their innovation lies under the hood... invisible until needed. They simply do what others try to do... better.
When the true deep ar/vr thinkers and visionary folks look at the now revealed Apple Headset and its capabilities the stock is going to go much much higher. All the "talking heads" and business channel blowhards will regret the day they took their all too familiar "too expensive, doesn't do anything, nobody will buy it BS"
Right now we're seeing the same old BS they used on the iPhone, the Watch, and the iPad so party on Garth but be forewarned your current vision will end in tears.!
In the beginning of 2024 when this goes on sale it will sell out in 5 minutes guaranteed.....!!!
Que the haters and shortees in 3....2.....1.....
About iPhone the watch and so on.But those are the same items that made appl hit all time highs on the day the Vision Pro was unveiled.Btw I am so happy they slapped all the rumors regarding the name.They chose to name it with a word that will never be out of style as it is part of our DNA. The vision.Congrats.