Apple Inc. (NASDAQ:AAPL) Is an iPhone subscription coming?

Apple Inc. (NASDAQ:AAPL) Is an iPhone subscription coming?

Apple Inc. (NASDAQ:AAPL) Is an iPhone subscription coming?

iPhone generally represents at least half of Apple (NASDAQ: AAPL) revenue, and the smartphone has been struggling. Even with over a week of sales of Apple’s newest iPhones in its most recent quarter, the important segment’s revenue was down during the period.

CEO Tim Cook tried to frame that in a positive light during the company’s fiscal fourth-quarter earnings call. “iPhone revenue in the September quarter was $33 billion,” he said. “This 9% decline over last year is a significant improvement over the 15% decline we saw across the first three quarters.”

Still, iPhone revenue was more than half of Apple’s Q4 total of $64 billion. The company did post 17% growth in its non-iPhone businesses, with service revenue jumping by 18% and wearables growing by “well over 50%,” Cook said during the company’s earnings call. That’s positive news, but it’s overshadowed by the drop in iPhone revenue — a drop Cook may have a plan to address.

Is an iPhone subscription coming?

Apple has generally not been in the subscription business aside from its Apple Music service and newer services like Apple News+, Apple Arcade, and Apple TV+. That may change, with Cook not shooting down the idea of bundling an iPhone with other services in a response to a question from analyst Toni Sacconaghi during the Q4 call.

In terms of hardware as a service or as a bundle, if you will, there are customers today that essentially view the hardware like that because they are on upgrade plans and so forth. And so to some degree that exists today, my perspective is that we will grow in the future to larger numbers that will grow disproportionately. And one of the things we are doing is trying to make it simpler and simpler for people to get on these sort of monthly financing kind of things.

That’s not entirely committing to directly offering an iPhone subscription that keeps consumers with the latest device in exchange for a monthly fee. Cook did, however, make it clear that he sees the demand, and that some steps are being taken.

We are cognizant that there are lots of users out there that want sort of a recurring payment like that and the receipt of new products on some sort of standard kind of basis and we are committed to make that easier to do than perhaps it is today.

It’s not clear exactly how an iPhone subscription would work and what would be included. Cook did, however, acknowledge that consumers want a subscription plan (without using those exact words) and that Apple may address that.

This is good news for investors

Some consumers create a sort of virtual iPhone subscription by replacing their phones every year. That’s unpredictable revenue for the company, because it’s dependent on consumers deciding that the new model is worth it, since upgrading often requires a lump-sum payment for a portion of the new phone (with the rest being financed).

If Apple can offer a subscription bundle that evens out expenses for consumers while assuring them the latest phone (along with services such as Apple Music and Apple TV+), that should appeal to consumers. Many people already have a sort of never-ending iPhone payment because they upgrade at least every other year. A subscription won’t change that, but it will lock in their expenses and eliminate the yearly “should I or shouldn’t I” upgrade decision.

Investors generally like subscription revenue. It’s predictable and makes discretionary spending recurring. Offering a subscription iPhone bundle, therefore, would lock in consumer loyalty and make Apple revenue more predictable. It will also have the secondary effect of driving revenue for other Apple services like Apple TV+ and Apple Music (albeit probably at reduced rates as part of the bundle).

Consumers want this type of subscription because it gives them budget certainty. Apple should want it for the same reason. Cook did not commit to this major business model change, but he certainly opened the door for it, and investors should be excited about the possibility.

Technical Indicators

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

By the way, prices are vulnerable to a correction towards 227.38.

The projected upper bound is: 266.74.

The projected lower bound is: 246.64.

The projected closing price is: 256.69.

Candlesticks

A big white candle occurred. This is generally considered bullish, as prices closed significantly higher than they opened. If the candle appears when prices are “low,” it may be the first sign of a bottom. If it occurs when prices are rebounding off of a support area (e.g., a moving average, trendline, or retracement level), the long white candle adds credibility to the support. Similarly, if the candle appears during a breakout above a resistance area, the long white candle adds credibility to the breakout.
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 27 white candles and 22 black candles for a net of 5 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 80.8816. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 3 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 75.93. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 3 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 177.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 3 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 19 period(s) ago.

Rex Takasugi – TD Profile

APPLE INC closed up 7.060 at 255.820. Volume was 41% above average (neutral) and Bollinger Bands were 64% wider than normal.

Open     High      Low     Close     Volume___
249.540 255.930 249.160 255.820 37,781,336
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 245.40 225.28 199.29
Volatility: 27 29 31
Volume: 26,482,506 27,296,314 27,827,616

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

APPLE INC is currently 28.4% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume into AAPL.O (mildly bullish). Our trend forecasting oscillators are currently bullish on AAPL.O and have had this outlook for the last 52 periods. Our momentum oscillator is currently indicating that AAPL.O is currently in an overbought condition. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.

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