Apple's (AAPL +0.54%) stock has fallen about 10% since mid-September. The leading causes for the dip have been numerous reports that sales for its base-model iPhone 14 and 14 Plus have been underwhelming and an overall slowdown of consumer demand in the tech market.
As the highest-valued company in the world, with a market cap of $2.37 trillion, Apple is one of the world's most scrutinized companies. The last two months have been no different as analysts pick apart the company's September iPhone launch and its 2022 iPad lineup unveiling in mid-October.
Understanding the strategy behind Apple's recently announced products can be a great way to predict how far your investment will go. So, here's why Apple's new products have been making headlines.
A confusing iPad launch
On Oct. 18, Apple unveiled its 2022 iPad refresh by introducing a newly designed base iPad and upgraded iPad Pros. Time will tell how the new Apple tablets fare with consumers, but the media has been quick to criticize the devices. Bloomberg has called the new iPad lineup "perplexing," while Techradar said its "software and now hardware is a mess."
The primary reason for the confusion lies in upgrades to the entry-level iPads, but not the Pro versions. The base iPads received a redesign with new colors, relocation of the front-facing camera to the landscape's edge, and a revamped Magic Keyboard accessory. Meanwhile, the 2022 iPad Pro models received the smallest update in their history. They were bumped up to the M2 chip, making them 15% faster than their predecessors, along with other minor performance upgrades.
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Key Data Points
However, the higher-cost versions didn't receive the same optimal camera relocation or the redesigned Magic Keyboard. The Pro models didn't even receive the customary camera or display improvements that consumers have come to expect year to year. As a result, Apple has given consumers little reason to upgrade to the 2022 iPad Pro and created confusion by omitting features given to the base iPad.
Moreover, despite the base iPad's more enticing improvements, it has not been left unscathed by criticism. The tablet has undergone a significant redesign, including its charging port going from lightning to the market-preferred USB-C. However, it is still only compatible with the 2015 Apple Pencil accessory that charges via lightning rather than the redesigned 2018 version that charges magnetically along the side of higher-tiered iPads. As a result, users need to use an adapter to charge their Apple Pencil with the new base iPad.
iPhone 14 Plus is a bust
In addition to a confusing iPad lineup, Apple has reportedly faced dismal demand for its iPhone 14 Plus, which hit stores on Oct. 7. The base-model iPhone was announced on Sept. 7, along with two new Pro models and a standard-sized base model. Apple had high hopes for the larger iPhone 14 as it signified a shakeup in the lineup. There hasn't been a Plus-sized base model since 2017's iPhone 8 Plus, as the larger iPhones have been exclusively Pro versions.
However, the rising cost of living and a difficult price point led Apple to halt production of the iPhone 14 Plus on Oct. 18 to reassess demand. According to The Information, two of the company's suppliers are lowering output by 70% and 90%.
The iPhone 14 Plus is at a logical price point in the lineup, coming in at $899, while the smaller iPhone 14 is $799 and the Pro models are $999 and $1099, respectively. However, looking at Verizon plans, the 14 Plus is priced at $24.99/month, while the 14 Pro Max is $30.55/month, and the 13 Pro Max is $10/month. Since many Americans will likely procure their new iPhones through a carrier plan, there is little reason to get the Plus.
Consumers wanting the biggest iPhone can get the 14 Pro Max with all of the new features for an extra $5.56 a month, or those with older phones can get the 13 Pro Max, which is 60% cheaper than the 14 Plus and has more features.
Should you buy Apple stock?
Troubled iPhone sales are worrying, as the popular devices have made up 40% to 70% of Apple's revenue for the last decade. In fact, its iPhone sales comprised 49% of Apple's revenue reported for the most recent quarter of 2022.
With these details in mind, it's certainly possible that the tech company may be heading toward a weak quarter. Even so, Apple likely won't stay down for long. After all, Apple is home to some of the world's most innovative and popular products. This unique strength helped grow Apple stock 270% over the past five years despite a pandemic and the reduced demand for iPhones in 2022.
The company reported $20.79 billion in free cash flow in its latest quarter, which suggests it is fully equipped to overcome a year of weak iPhone sales. Ultimately, Apple stock remains an excellent investment for the long term.
