Apple Event and China Ban Pressure Stock

The launch of the latest edition of the iPhone left investors unimpressed but not disappointed in a particularly challenging time for the industry and Apple in particular.

The Big "Meh"

Apple's annual launch day on Tuesday after markets closed generally left investors underwhelmed. Share prices were down 2% for the trading day, in which all the major indices underperformed. Investors concluded that there wasn't much new to get enthused about with the iPhone 15, certainly not enough to curb the six-week slide in the stock price that preceded the event. The new phone didn't see an upgrade in price, implying the company will face continued margin pressures from costs and could be seen as a worrying sign of slower demand.

The most talked-about change was switching the Lightning charger for the standard USB-C charger, although there were improvements in performance and new cameras. It coincides with a bad time for the smartphone industry as a whole, as global consumers are facing a cost-of-living crunch. But, in that scenario, Apple could be better positioned than its more economical Android-based rivals. High-end phones continue to sell relatively well, as people with higher incomes are riding the economic storm better than the customers who would go for a mid- or entry-level device. Still, Apple has resisted the worst slump in the smartphone market in a decade.

China Uncertainty

Last week, it was reported that China had moved to ban government employees from using iPhones at work, which was seen as part of the trade tensions with the US that had banned Huawei phones. This came when the Chinese flagship manufacturer Huawei, launched a new smartphone with more advanced capabilities than expected.

But, on Wednesday, the Chinese government pushed back on those reports, saying there was no such ban. At the same time, it also emphasised worries about security issues with the device. This confused investors about Apple's status in its largest market and production base. Media reports suggested that several Chinese government agencies were already banning employees from using foreign-made phones, just as Apple launched its new model. The potential of a ban in the market that accounts for a fifth of the company's revenue introduces increased uncertainty despite the assurances from the government that there is no move to curb sales of iPhones.

The lacklustre product launch that coincided with uncertainty about the status of Apple in China certainly prevented the stock from getting a boost. Now, traders might have to wait until the release of earnings in October to see a solid recovery.

Apple in Impulse or Flag

From a longer-term perspective, Apple still trades closer to the top of 2023 than the bottom at $125. However, after the steep drop from around $200 down to $172, speculation for further declines has risen. If $190 holds firm and $172 gives in, the bearish price action could complete an impulse, exposing $157 and perhaps $143. Conversely, a double-bottom could see the stock either consolidate or break to new highs, resembling a bullish flag alone.

Source: SpreadEx / APPLE INC

Key Takeaways

Investors were underwhelmed by Apple's latest iPhone launch, causing a 2% drop in share prices. The lack of significant updates to the iPhone 15 and the absence of a price increase raised concerns about slower demand and margin pressures for the company. Despite this, Apple may be better positioned than its Android-based rivals due to high-end phones selling relatively well among higher-income customers. Additionally, there was uncertainty regarding Apple's status in China, with reports suggesting a potential ban on iPhones for government employees. While the Chinese government denied the existence of a ban, concerns about security issues persisted. The lacklustre product launch and uncertainty in China have prevented a stock boost, with traders potentially waiting until October's earnings release for a solid recovery.