Apple is the largest stock in the S&P 500 – and the iPhone is the company’s key product. So it’s wise for investors to pay attention to a new release – they just aren’t impressed anymore.
Market reception Apples (AAPL) the new iPhone 14 due today is already lukewarm. Wall Street seems fed up with iterative changes. Apple’s stock was down 6.3% in the month before the Sept. 7 announcement, according to an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. It was the stock’s worst performance before a new announcement since shares fell 8% in the month before the September 2015 release of the much-maligned iPhone 6s.
“Apple is expected to release a new version of the iPhone (September 7), and while these events generally excite consumers and tech commentators, investors tend to have a more muted reaction,” Bespoke Investment Research said.
The S&P 500’s dependence on Apple
It may seem odd that S&P 500 investors are watching the performance of the latest iPhones. But given Apple’s enormous weight in the index, this makes perfect sense. Apple’s market value is now $2.5 trillion. It is also by far Warren Buffett’s largest dollar holding.
Apple has been the largest and most important stock in the S&P 500 every year since 2019, says Howard Silverblatt, strategist at S&P Dow Jones Indices. Apple alone accounts for over 7.2% of the S&P 500. No other company in history has accounted for a larger share of the S&P 500 than Apple in 2021 and 2020 at over 6.8%. Even at its peak in the 80s, IBM (IBM) accounted for just 6.4% of the S&P 500.
Microsoft (MSFT) is now a distant No. 2 in the index, at 5.8%. And those two companies, Apple and Microsoft, are a big part of why the information technology sector makes up 27.3% of the S&P 500 this year, more than any of the 11 S&P 500 sectors.
Thus, the iPhone counts for the S&P 500.
Investors reading the S&P 500 on the iPhone 14
Consumers expect the new iPhone to be a minor change, and that’s certainly what investors are reading too.
Even if you go back three months, you’ll see that Apple’s stock only rose 10.2% during that time. That’s below the average 15.9% increase over this period of all iPhone models dating back to the original. It’s important to note, however, that the S&P 500 was also down almost 3% during this time. Similarly, in the six months leading up to tomorrow’s announcement, Apple shares were up just 6.6%. That’s a fraction of the typical 22% rise in the six months leading up to an iPhone announcement. This is still less than the 7.3% rise at that time in the Technology Select SPDR (XLK).
In many ways, the magic of iPhone ads is long gone, although the profitability is still there.
In search of the future of the iPhone
“While a new product can be exciting for consumers and anyone in the Apple fandom, investors tend to be cold about these events,” Bespoke said. “On average over the 18 days that a new iteration of the smartphone was announced, AAPL’s stock was up only 22% of the time with an average decline of 0.32%. In fact, AAPL doesn’t hasn’t reacted positively to an iPhone announcement since the iPhone 11 in 2019.”
Fans are hoping for bigger gains to come after the new iPhone hits stores. But investors should note that most stock market action does not coincide with iPhone releases. The stock fell an average of 0.2% on the day of the announcement and rose only 3.8% over the following three months.
“AAPL’s performance is generally positive within a few months of dropping a new iPhone,” Bespoke says. “However, average and median earnings are below norm for all periods since the start of 2007; the iPhone era for the enterprise.”
New iPhone? S&P 500 investors don’t care
Investor reactions to the new iPhones
|Model||Announcement||Share % ch. week before year||Coming months Sch. stock % ch.||Share % ch. 3 months ahead of ann.||6 months ahead of ann. stock % ch.|
|Averages before iPhone 14||0.3%||4.1%||15.9%||21.9%|
|Select SPDR Technology (XLK)||09/07/2022||14.3%||6.0%||13.4%||7.3%|
|S&P 500 (SPY)||09/07/2022||-1.0%||-5.3%||-2.6%||-6.9%|
Sources: IBD, S&P Global Market Intelligence
#Apples #iPhone #worst #reception #iPhone