Apple's New iPhone 16 Didn't Seem All That Impressive. But Here's Why Its Sales Numbers Could Be Strong.
Apple (NASDAQ: AAPL) has grown more diverse over the years with the launch of services to help enhance its top line and to expand its already robust ecosystem. But ultimately, this is still a company that relies heavily on iPhone sales, which today account for approximately half of all revenue for the company.
As Apple sells more iPhones, particularly to new customers, that also means more people are in its ecosystem and using its services. This is why the newest iPhone can be an extremely important indicator for the business' future growth, as a strong performance could lead to greater revenue on other fronts.
Recently, Apple unveiled its latest phone, the iPhone 16. While it will provide users with a phone that is ready for artificial intelligence (AI) features, it may not be all that exciting. But looks can be deceiving, and early accounts are that the new iPhone is doing just fine. Here's why it could be a big growth catalyst for the business.
T-Mobile CEO says sales are doing better than the iPhone 15 at this stage
A good way to gauge how the iPhone is doing is by listening to what executives at major telecom companies are saying. T-Mobile CEO Mike Sievert isn't seeing any issues at all since the launch of the new iPhone. In a recent interview with CNBC, Sievert said sales are strong across the board: "People are buying Pros, they're buying Maxes, so they're buying up the food chain, and they're buying at a greater rate than last year." He also dismissed analyst reports which suggested that sales weren't off to a strong start as "nonsense."
The caveat, of course, is that the iPhone has only been available for preorder since Sept. 9. There's a possibility that people rushed to place orders in advance and due to the expectation of it being a big hit, which led to strong sales performance based solely on that anticipation. However, Sievert hasn't hinted at any drop off yet.
But with people holding on to their phones a lot longer these days due to inflation and perhaps a lack of new and compelling features from Apple in its previous iPhones, it may also not take a whole lot to convince them to finally upgrade. The promise of new AI features could be sufficient.
Delaying AI features could prove to be a genius move
One thing that stood out to me in Sievert's interview is that he also believes the sales cycle could last longer than normal, simply because Apple hasn't rolled out all of its AI features yet, and they might not all be available until 2025.
Whether it's by design or not, that could truly be a genius move for the company, as it may lead to multiple catalysts for the iPhone 16. The first is the launch of the phone itself, then successive ones could be the announcement of new AI features. For customers who are on the fence about upgrading right now and who may not be among those who have placed orders for the iPhone 16, news of an exciting new AI capability could be what convinces them to upgrade sooner rather than later.
Through the quarter ended June 29, Apple's iPhone sales totaled $39.3 billion, which is slightly less than the $39.7 billion it posted in the same period last year. Over the past three quarters, iPhone sales are also down by a little more than 1%.
By having some softer numbers of late, Apple could be due for some stronger quarters ahead. The reality is that it may not necessarily need a big new feature to lead to strong revenue growth. The ability for users to be able to take advantage of AI may be enough to do the trick.
Should you buy Apple stock today?
Shares of Apple are up 18% this year, as it has largely been keeping pace with how the markets have been doing. As a leader in the smartphone market, Apple can always make for a good growth stock to buy if you're willing to hang on for the long haul.
Investors shouldn't worry too much about Apple's short-term performance from one quarter to the next. Even if this iPhone may not be the one that triggers a huge flurry of upgrades, the next one might. Regardless of how strong iPhone 16 sales prove to be, Apple remains one of the safest investments you can hold in your portfolio for the long haul.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.
Apple's New iPhone 16 Didn't Seem All That Impressive. But Here's Why Its Sales Numbers Could Be Strong. was originally published by The Motley Fool