Did you hear the thud during Apple’s new iPhone announcement? That was the new iPhone 12 falling flat with S&P 500 investors.
Shares of Apple Stock dropped 2.7% Tuesday following the company’s announcement of the latest iteration of its smartphone. That was Apple stock’s worst one-day reaction on an iPhone announcement. And that goes back to the launch of the original iPhone in January 2007, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
And don’t think the reception to the iPhone is only important to Apple investors. Where Apple goes, so leans the S&P 500.
Apple is now worth $2.1 trillion, making it, by far, the most valuable S&P 500 stock. It accounts for 6.8% of the world’s most popular index’s value. That edges out even Microsoft (MSFT), which accounts for 5.7% of the S&P 500. Apple accounts for an even larger slice of the S&P 500’s profit.
But more importantly, adoption of Apple’s hardware often has a windfall on many other companies in the S&P 500. Analysts hope the new iPhone “could be a game changer looking ahead as more infrastructure, technology, and apps are built around this transformational 5G highway over the coming years,” said Dan Ives, analyst at Wedbush Securities.
So why the historically poor debut?
New Apple iPhone 12: An S & & P 500 Thud
S&P 500 investors are trained to expect a pop when a new iPhone is announced. But the iPhone 12 got just the opposite.
Apple stock’s 2.7% drop Tuesday to 121.10 is a far cry from the 1.2% jump the stock saw on the iPhone 11’s announcement in September 2019. And it was worse than the 2.3% drop in Apple’s stock on the the launch of the Apple 5s in September 2013. That had been the worst reception to a new iPhone until this week.
The poor showing of Apple stock certainly didn’t help the S&P 500 or the technology sector. The S&P 500 faltered 0.6%, dragged down in part by a 0.6% drop in the Technology Select Sector SPDR ETF (XLK). Apple accounts for a bigger slice of the S&P 500 technology sector than any other stock: 23.3%.
Apple Investors Buy Apple Stock First
What’s different this time? Investors who wanted to buy Apple stock, already did. Investors chasing mega-cap S&P 500 stocks all year poured into Apple ahead of the announcement with fervor not seen since leading up to the original iPhone.
Shares of Apple stock are up 69% over the prior six months. That’s nearly 300% above the average 18.4% gain of Apple stock in the six months ahead of iPhone announcements. In fact, the only time Apple rose this much was when it soared 77.2% in the six months prior to Steve Jobs’ famous iPhone unveiling of the original iPhone.
It’s looking more like investors are getting ahead of themselves. Even after falling 2.7% to 121.10 a share on Tuesday, Apple stock is still 0.5% past the 120.53 analysts think it should be worth — in 12 months.
And analysts think Apple’s adjusted profit per share will drop nearly 8% in the September quarter reported on Oct. 29. Plus, Apple’s IBD Composite Rating is a strong 89, but not in the 90s like most other S&P 500 leaders. Do you know what to look at if you’d like to buy Apple stock?
And yet, Apple’s stock continues to defy odds. Even following the disastrous 2013 launch of the iPhone 5s, Apple’s stock was up 43% 12 months later, blowing away the S&P 500’s 18.5% gain during that time.
In that way, Apple and S&P 500 investors hope history repeats itself.
Apple Stock And S&P 500 Reactions To iPhone Announcements
|Announced||Stock % Ch. Six-Months Ahead Of Announcement||% Ch. Stock Announcement Day|
|iPhone 12||10/13/2020||69.0%||-2.7% (lowest)|
|Technology Select SPDR (XLK)*||10/13/2020||37.5%||-1.9%|
|S&P 500 (SPY)*||10/13/2020||25.5%||-0.6%|
Sources: IBD, S&P Global Market Intelligence, * from iPhone 12 announcement day
Follow Matt Krantz on Twitter @mattkrantz
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