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The reason behind why the Apple stock price is rising now stems from one major factor that most "experts" missed...
Apple shares' 11.5% spike over the past few days is due to the radically shifting expectations for sales of the new iPhone 7.
Apple Inc. (Nasdaq: AAPL) only introduced the latest models of its flagship product just over a week ago, on Sept. 7. Leading up to the event, analysts and tech pundits alike were convinced the iPhone 7 would be a yawner of an upgrade that would fail to revive sales of the device.
Apple had no surprises for them - the announced improvements to the iPhone 7 almost perfectly matched the pre-event rumors.
The new iPhones were the same sizes with basically the same screen, although they got improved battery life, more storage, and waterproofing. Worst of all, Apple removed the audio jack, a move sure to anger customers.
Then Apple said the next day that it would not announce the first weekend sales numbers as it has done in the past. (The iPhone 7 goes on sale tomorrow.)
That immediately sparked speculation that Apple was seeking to cover up a disaster in the making.
"Less data is never good, particularly given the question marks around this phone," BGC Partners analyst Colin Gillis told Reuters.
Then reality set in...
Why the Apple Stock Price Is Rising This Week
"The first four days of the iPhone 7 launch are by far the biggest ever for T-Mobile. It's four times bigger than the iPhone 6 for us, at this stage."
A Tuesday press release from Sprint announced that iPhone 7 pre-orders were up 375% over last year's iPhone 6s debut. Impressive, but the iPhone 6s models haven't killed it.
That's why T-Mobile's announcement was such a show-stopper.
"The first four days of the iPhone 7 launch are by far the biggest ever for T-Mobile. It's four times bigger than the iPhone 6 for us, at this stage," T-Mobile CEO John Legere said in a Periscope interview on Tuesday.
Think about that. The iPhone 6 models were the first iPhones to have the larger screen sizes, and sold in phenomenal numbers. According to Legere, the iPhone 7 so far has quadrupled the sales of that blockbuster product.
Late yesterday (Wednesday) Apple even joined the party, announcing it had completely sold out of the larger iPhone 7 Plus.
Meanwhile, Apple's chief rival Samsung has been suffering through a public relations disaster. The South Korean tech giant has been forced to recall its Galaxy Note 7, a device intended to compete with the iPhone, after customers were injured by exploding batteries.
Suddenly the AAPL stock bears went silent, while the bulls came out of hiding.
"It's just a great, stable company on top of the fact that the iPhone 7 sales are doing so well is just one more reason to keep on holding it," Erin Gibbs, chief equity investment officer at S&P Global, told CNBC yesterday.
The Apple stock price took off, rising 2.38% on Tuesday and another 3.5% yesterday to close at $111.77 amid overall market volatility. With Apple stock up another 3% so far today (Thursday), AAPL shares have gained 11.5% since Friday's close at $103.13.
Apple stock is now trading at a nine-month high, up 27.5% from its 2016 low in May and 9.4% on the year.
For the record, Money Morning predicted strong sales for the iPhone 7 even before it was announced last week. [See: Why Apple Stock Is a Buy as the iPhone 7 Debuts]
We recognized that while the iPhone 7 might seem "boring" to analysts and technophiles, the changes Apple made are exactly what the majority of its customers want most.
Here's what I mean...
Why the iPhone 7 Sales Will Drive AAPL Stock Higher
Customer surveys for years have suggested that the typical smartphone buyer isn't looking for gee-whiz features when shopping for their next device.
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Instead, they want improvements that will benefit them in everyday use - better battery life, more storage for photos and videos, better cameras, more responsiveness.
A June survey by Kantar Worldpanel of iPhone 6s owners thinking of upgrading asked which new iPhone 7 features would be most likely to lure them into taking the leap. Three out of four said improved battery life, two-thirds said a better camera, and just over half said more storage.
The iPhone 7 scores big on all three counts.
Since the iPhone 5, Apple's offerings have been more than competitive with most of its Android competition on battery life. Now Apple has increased battery life by two hours for the iPhone 7 and one hour for the larger iPhone 7 Plus.
Apple also increased storage across the line, doubling the minimum from 16 gigabytes to 32 GB.
The iPhone 7 camera is much improved in low light conditions, and the iPhone 7 Plus has a dual camera setup that will allow for special effects like depth of field photography.
Other top things people look for are brand name and ease of use - two categories Apple already had locked down.
As a bonus, Apple made the iPhone 7 far more water resistant - it can survive being fully submerged for up to 30 minutes.
If the success of the iPhone 6 taught us anything, it's that giving customers what they want most results in huge sales. The most compelling features of the iPhone 6 models were their size - hardly a whiz-bang feature, but one millions of people coveted.
Wall Street already has begun scrambling to revise its iPhone 7 sales forecasts and Apple stock price targets.
Today BTIG Research raised its AAPL stock price target from $124 to $133, while Credit Suisse (NYSE: CS), which has an Apple stock price target of $150, boosted its iPhone 7 sales estimates for 2016 and 2017 by 3% each.
But even with these revisions, Wall Street still doesn't get what's happening with Apple. Here's why Money Morning Chief Investment Strategist Keith Fitz-Gerald sees AAPL stock hitting $200...
- Reuters: Apple Will Not Give First-Weekend Sales of iPhone 7
- CNBC: Apple Shares Are Soaring, and Here's Why They're Going Higher: Trader
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.