Why You’re Probably Too Late to Make Money off Apple’s Iphone 8
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Why you’re probably too late to make money off Apple’s iPhone 8
The next one is nearly here.
Apple CEO Tim Cook is expected to unveil the company’s latest iPhone on Tuesday. Expectations, as always, are running high. Among the rumors: facial recognition to unlock your phone, and a luxury product priced at over $1,000.
It is no news that Apple’s stock AAPL, -0.35% has been an absolute phenomenon since the late Steve Jobs unveiled the first iPhone just over 10 years ago. It’s rocketed 1,200% during that time.
It’s outperformed the S&P 500 Index SPX, +0.34% by more than 1,100 percentage points. And even today, a decade later, iPhones remain an icon and a virtual fetish.
People will presumably sleep out in the streets in order to get the next iPhone as soon as it comes out, as they have in the past.
But if you’re thinking of buying some more Apple stock to trade the buzz, you might want to think again.
I fired up the WOPR and ran the numbers. And it turns out that, surprisingly, Apple stock has typically not outperformed the broader stock market in the months after a new iPhone was unveiled.
On the contrary, the biggest trading gains have come in the months beforehand. In other words, it’s a variant of the old stock market adage “buy on the rumor, sell on the news.
There have been nine previous iterations of the iPhone since 2007. I looked at relative stock performance around the launches, rather than the price performance, because the latter is highly misleading.
For example, it makes the iPhone 3G look like an absolutely terrible launch because it occurred shortly before Lehman Brothers imploded.
And I used the S&P 500, rather than the technology-heavy Nasdaq CompositeCOMP, +0. 34% because Apple is just so big, and so cash flow positive, that comparing it with smaller, higher-risk tech stocks also might be misleading.
What did I find? During the six months around the launch of a new iPhone, Apple stock has typically outperformed the market by an average of 16.3 percentage points.
But — again, on average — all of that outperformance has come during the three months leading up to the announcement, and none of it afterwards. The averages: 16.4 percentage points beforehand, and minus 10 basis points (yes, minus) afterwards.
(A basis point is one hundredth of 1%.). See: Red Sox caught using Apple Watch to steal signs from Yankees.
To be sure, we are dealing with a small sample. The three-month time period — actually, I used a constant 65 trading days — is arbitrary. And averages can be misleading. The outperformance was stronger in the early years.
In the six months around the launches of the iPhone 3 and 3GS in 2008 and 2009, Apple outperformed the index by 39 and 44 percentage points, respectively.
In the past five years, the average has been just 4 percentage points, and a couple of times — 2012 and 2015 — it has actually underperformed.
But for all that, one pattern has remained pretty strong: Apple stock has usually done far better in the months leading up to the launch of a new iPhone than it has in the months immediately afterward.
That’s been the case seven of nine times so far.
The only time the reverse has been true was when the stock had done relatively poorly in the initial three months. That left room for bigger gains once the new iPhone had been launched.
Since June 13, 2017, Apple has risen from $147 to $159, a gain of 8.2%. The S&P 500 over the same period is up 1%.
That 7 percentage-point outperformance isn’t outsized, and may leave room for further gains, but by the standards of recent history it’s still pretty sizable. History suggests the next three months won’t be as good, at least in relation to the broader market.
Naturally, if Apple sets the market on fire over the next three months, you can have a good laugh at my expense. Oh, but on the bearish side: Since I’ve fired Google Android GOOG, +0.32% I finally got an iPhone. Is the market saturated yet?.
