Apple’s New 5G iPhones May Meet With Tepid Demand

Tepid demand for new 5G iPhones may mean big disappointment for Apple investors. 

Apple Inc. has been in the spotlight lately, between antitrust scrutiny of its mobile operating system and the legal battle it’s waging with Fortnite maker Epic Games Inc. over its App Store. Those developments pale, however, in comparison to the company’s main event next week: the unveiling of its latest iPhones.

For all the talk about Apple’s shift to services and subscriptions, the tech giant’s business is still dependent on its core hardware products, so Tuesday’s presentation will be a must-see for investors. There could be a problem this year, though. The lineup’s most vaunted feature — fifth-generation wireless capability — may not be ready for prime time. 

The Cupertino, California-based company is expected to unveil four new iPhone models with 5G capabilities as well as a different physical design and a wider choice of screen sizes, Bloomberg News reported last month. Apple is already touting the new technology’s attributes: Earlier this week, it sent the news media an invitation to Tuesday’s event with the cheeky pun “Hi, Speed” as the subject line, referencing the fast new 5G networks.

Investors are betting the iPhones will be a blockbuster success and spur consumers to upgrade. Shares of Apple have risen more than 50% this year and now trade at roughly 31 times the next four quarters’ earnings, nearly double its historical five-year average of 16. And those earnings estimates also have high embedded assumptions. To take one example, Morgan Stanley forecasts Apple’s iPhone sales will grow by 28% in its fiscal year ending in September 2021. That would mark a dramatic turnaround from the 14% sales drop in fiscal 2019 and the estimated 7% decline for 2020.

IPhone Critical

Smartphones are still Apple’s largest revenue mix category

Source: Company reports. Apple’s fiscal quarters.