Apple’s New 5G IPhones May Be Left on the Shelf, , on October 9, 2020 at 10:30 am

Financial News
By
On October 9, 2020
In Financial News
Tags:

(Bloomberg Opinion) — 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 press 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.An elevated valuation would be fine if the new iPhones sell well, but the lackluster reality surrounding the current state of 5G networks could lead to underwhelming demand. PC Mag found the new wireless technology was often slower than 4G after it recently conducted tests in 26 U.S. cities, adding “5G results were disappointing all around on every carrier.” The Washington Post had similar conclusions and found no speed improvement for 5G phones and in many cases slower numbers. There are several technical reasons for the weak results, ranging from the more prevalent use of the slower “mid-band” 5G spectrum to the anemic coverage buildout of the faster 5G millimeter wave service. Bottom line, the 5G experience for U.S. wireless carriers in most circumstances isn’t better than 4G right now. It will take time, so why shell out hundreds of dollars for an upgrade now?Key industry figures are already lowering expectations. A few weeks ago, AT&T Inc. CEO John Stankey said demand for the 5G iPhone may not be as strong as anticipated owing to the economic uncertainty from the pandemic and the less dramatic wireless speed improvements. Before that, Hock Tan — CEO of iPhone chipmaker Broadcom Inc. — answered a question on near-term trends for 5G on a call with the investors by saying, “To be honest about this, we don’t know how fast the ramp on 5G will occur.” It’s pretty telling when the leader of one of Apple’s largest wireless chip suppliers seems hesitant to extol the promise of his industry’s most-talked about growth driver.Even if 5G network coverage was amazing, there is another problem. Almost all the most-used mobile apps, including TikTok, Instagram and FaceTime, work fine on 4G networks. There simply isn’t a need for 5G right now. Yes, there will be new killer apps some day that will require faster speeds, but they haven’t arrived yet.Amid the anticipation and excitement going into Tuesday’s product event, Apple investors may want to reassess their risks.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron’s, following an earlier career as an equity analyst.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.,

Apple’s New 5G IPhones May Be Left on the Shelf(Bloomberg Opinion) — 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 press 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.An elevated valuation would be fine if the new iPhones sell well, but the lackluster reality surrounding the current state of 5G networks could lead to underwhelming demand. PC Mag found the new wireless technology was often slower than 4G after it recently conducted tests in 26 U.S. cities, adding “5G results were disappointing all around on every carrier.” The Washington Post had similar conclusions and found no speed improvement for 5G phones and in many cases slower numbers. There are several technical reasons for the weak results, ranging from the more prevalent use of the slower “mid-band” 5G spectrum to the anemic coverage buildout of the faster 5G millimeter wave service. Bottom line, the 5G experience for U.S. wireless carriers in most circumstances isn’t better than 4G right now. It will take time, so why shell out hundreds of dollars for an upgrade now?Key industry figures are already lowering expectations. A few weeks ago, AT&T Inc. CEO John Stankey said demand for the 5G iPhone may not be as strong as anticipated owing to the economic uncertainty from the pandemic and the less dramatic wireless speed improvements. Before that, Hock Tan — CEO of iPhone chipmaker Broadcom Inc. — answered a question on near-term trends for 5G on a call with the investors by saying, “To be honest about this, we don’t know how fast the ramp on 5G will occur.” It’s pretty telling when the leader of one of Apple’s largest wireless chip suppliers seems hesitant to extol the promise of his industry’s most-talked about growth driver.Even if 5G network coverage was amazing, there is another problem. Almost all the most-used mobile apps, including TikTok, Instagram and FaceTime, work fine on 4G networks. There simply isn’t a need for 5G right now. Yes, there will be new killer apps some day that will require faster speeds, but they haven’t arrived yet.Amid the anticipation and excitement going into Tuesday’s product event, Apple investors may want to reassess their risks.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron’s, following an earlier career as an equity analyst.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

,

Instant Quote

Enter the Stock Symbol.

Select the Exchange.

Select the Type of Security.

Please enter your First Name.

Please enter your Last Name.

Please enter your phone number.

Please enter your Email Address.

Please enter or select the Total Number of Shares you own.

Please enter or select the Desired Loan Amount you are seeking.

Please select the Loan Purpose.

Please select if you are an Officer/Director.

High West Capital Partners, LLC may only offer certain information to persons who are “Accredited Investors” and/or “Qualified Clients” as those terms are defined under applicable Federal Securities Laws. In order to be an “Accredited Investor” and/or a “Qualified Client”, you must meet the criteria identified in ONE OR MORE of the following categories/paragraphs numbered 1-20 below.

High West Capital Partners, LLC cannot provide you with any information regarding its Loan Programs or Investment Products unless you meet one or more of the following criteria. Furthermore, Foreign nationals who may be exempt from qualifying as a U.S. Accredited Investor are still required to meet the established criteria, in accordance with High West Capital Partners, LLC’s internal lending policies. High West Capital Partners, LLC will not provide information or lend to any individual and/or entity that does not meet one or more of the following criteria:

1) Individual with Net Worth in excess of $1.0 million. A natural person (not an entity) whose net worth, or joint net worth with his or her spouse, at the time of purchase exceeds $1,000,000 USD. (In calculating net worth, you may include your equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities. Your inclusion of equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.)

2) Individual with $200,000 individual Annual Income. A natural person (not an entity) who had individual income of more than $200,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

3) Individual with $300,000 Joint Annual Income. A natural person (not an entity) who had joint income with his or her spouse in excess of $300,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

4) Corporations or Partnerships. A corporation, partnership, or similar entity that has in excess of $5 million of assets and was not formed for the specific purpose of acquiring an interest in the Corporation or Partnership.

5) Revocable Trust. A trust that is revocable by its grantors and each of whose grantors is an Accredited Investor as defined in one or more of the other categories/paragraphs numbered herein.

6) Irrevocable Trust. A trust (other than an ERISA plan) that (a)is not revocable by its grantors, (b) has in excess of $5 million of assets, (c) was not formed for the specific purpose of acquiring an interest, and (d) is directed by a person who has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of an investment in the Trust.

7) IRA or Similar Benefit Plan. An IRA, Keogh or similar benefit plan that covers only a single natural person who is an Accredited Investor, as defined in one or more of the other categories/paragraphs numbered herein.

8) Participant-Directed Employee Benefit Plan Account. A participant-directed employee benefit plan investing at the direction of, and for the account of, a participant who is an Accredited Investor, as that term is defined in one or more of the other categories/paragraphs numbered herein.

9) Other ERISA Plan. An employee benefit plan within the meaning of Title I of the ERISA Act other than a participant-directed plan with total assets in excess of $5 million or for which investment decisions (including the decision to purchase an interest) are made by a bank, registered investment adviser, savings and loan association, or insurance company.

10) Government Benefit Plan. A plan established and maintained by a state, municipality, or any agency of a state or municipality, for the benefit of its employees, with total assets in excess of $5 million.

11) Non-Profit Entity. An organization described in Section 501(c)(3) of the Internal Revenue Code, as amended, with total assets in excess of $5 million (including endowment, annuity and life income funds), as shown by the organization’s most recent audited financial statements.

12) A bank, as defined in Section 3(a)(2) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

13) A savings and loan association or similar institution, as defined in Section 3(a)(5)(A) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

14) A broker-dealer registered under the Exchange Act.

15) An insurance company, as defined in Section 2(13) of the Securities Act.

16) A “business development company,” as defined in Section 2(a)(48) of the Investment Company Act.

17) A small business investment company licensed under Section 301 (c) or (d) of the Small Business Investment Act of 1958.

18) A “private business development company” as defined in Section 202(a)(22) of the Advisers Act.

19) Executive Officer or Director. A natural person who is an executive officer, director or general partner of the Partnership or the General Partner, and is an Accredited Investor as that term is defined in one or more of the categories/paragraphs numbered herein.

20) Entity Owned Entirely By Accredited Investors. A corporation, partnership, private investment company or similar entity each of whose equity owners is a natural person who is an Accredited Investor, as that term is defined in one or more of the categories/paragraphs numbered herein.

Please read the notice above and check the box below to continue.

Singapore

168 Robinson Road,
Capital Tower, Singapore 068912
+65 3105 1295

Taiwan

5th Floor, No. 1-8, Section 5, Zhongxiao East Road, Taipei

Hong Kong

R91, 3rd Floor,
Eton Tower, 8 Hysan Ave.
Causeway Bay, Hong Kong
+852 3002 4462

Australia

44 Martin Place, Sydney 2000 Australia
+02 8319 3232

Indonesia

Millennium Centennial Center, 38th Floor, Jl. Jend. Sudirman Kav. 25
Jakarta 12920, Indonesia

Market Coverage