Why Apple stocks usually fall on the day new products are launched

Since its first launch in 2007, Apple stocks have fallen 75% of the time on its iPhone (new version) launch day. So what seems like a positive occassion, why does Apple's stock behave this way? Well, let's find out!

8th September 2022
3 min read

In a nutshell

Apple launches are no short of Epic! In January of 2007, Steve Jobs introduced the world with the OG iPhone and people were flocking to Apple store to buy their first iPhone.

What followed endless lines and day-long queues was a sale of 270,000 iPhones in just the first 30 hours. And, within the next 74 days, the company had sold their millionth iPhone!

Ever since Apple's launch events contribute hugely to iPhone's brilliant sales numbers. For instance, after the September 2021 launch, Apple sold more than 40 million iPhone 13 units in the holiday season!

Now, the fluctuations in the stock market typically reflect the consumer sentiment about a company. So, if investors have strong faith in the company, they buy the stocks. But, even though launches seem like a "HAPPY" event, during the launch day, Apple's share price always drops!

1. In 2021, it dropped by 0.96%.
2. In 2020, for the iPhone 12 series launch, share price dropped by 2.65%.
3. The same trend dates back to most of its launches since 2007. In fact, only 4 launches since the first iPhone saw an upward trend in the stock price!

You see, investors are accustomed to regular innovation from Apple and many of the details are already leaked or teased prior to the launch.

So, people start buying Apple stocks much earlier and the positive impact of the new release is already priced into Apple's shares way before the launch day.

Now, Apple has been so synonymous with innovation that even a product that is many times better than its predecessor is not enough to satisfy shareholders. So when Apple is unable to deliver another revolutionary product, the effect is seen in its stock price.

Seeing the stock price drop causes panic and more people sell, causing the price to fall further on the day of the launch!

In the long run, the iPhone launch event doesn't affect the stock price as much as their quarterly revenue, cash flow and profit numbers.

Moreover, while Apple may have historically been the "iPhone company", it is moving strongly towards becoming a software company. Apple's services business brings in ~$70 billion in revenue.

Nonetheless, iPhone still is Apple's MAIN cash cow and contributes to 50% of Apple's revenue. So while it's unlikely that a launch event will have a long-term effect on the stock price, launch events will still be critical for the growth of the iPhone & Apple.


Back in 2007, when Steve Jobs declared that "Apple was going to reinvent the phone", he mentioned Wayne Gretzky's famous quote — "I skate to where the puck is going to be, not where it has been"

.

Fairly enough, from Day 1, Apple has diligently stuck by Gretzky's words. And, as a result, we have witnessed a long list of amazing product launches!

First, came the Mac, then the iPod, then the iPhone — Apple rarely disappoints its die-hard fans. And, neither does it fail to generate value for its investors.

In just the last 5 years, Apple's stock has gone up by ~290%.[1] And, it's the crown jewel of Warren Buffet's illustrious portfolio!

But, in a weird twist, during the HYPE of an Apple Launch event, Apple stocks take a hit and have historically fallen down from their usual highs.

With Apple's "Far Out" launch happening today, we were curious to know what causes this sudden sell-off. So, let's dive in!

The history of Apple's iconic launches

Apple launches are no short of EPIC!

In January of 2007, Steve Jobs introduced the world to the OG iPhone. His most memorable launch speech had people flocking to Apple stores to buy their very first iPhone for $499.

What followed endless lines and day-long queues was a sale of 270,000 iPhones in just the first 30 hours[2]. And, within the next 74 days, the company had sold their millionth iPhone![3]

Even today, Apple's launch events contribute hugely to iPhone's brilliant sales numbers. For instance, after the September 2021 launch, Apple sold more than 40 million iPhone 13 units during the holiday season!

So although an Apple launch event today may not include a memorable speech like in 2007, the fact remains that the impact of a launch event on iPhone sales has not changed.

But, what's the effect of a launch event on Apple's stock?

The fluctuations in the stock market typically reflect the consumer sentiment about a company. So, if investors have strong faith in a company, they buy its stocks and the share price rises.

Now, we established that an Apple launch event is a HAPPY occasion. People are pumped up to buy the newest products and the overall sentiment is positive. So, the share price should reflect that and go up, right?

Well, the actual evidence says otherwise. You see, in 75% of launches, Apple's stock has fallen in value rather than going up![4]

  1. Take for example the latest iPhone 13 and 13 Pro series launch in September of 2021. At the end of the launch day, the price of the stock fell by 0.96%.
  2. For iPhone 12 series, the stock fell by 2.65% in 2020.
  3. The launch of the iPhone X series resulted in a fall of 1.21% in September 2018.
  4. The same trend dates back to most of its launches since 2007. In fact, only 4 launches since the first iPhone saw an upward trend in the stock price!
apple stock price falls on the launch day

So, why does Apple's share price fall after a launch?

You see, investors are accustomed to regular innovation from Apple and many of the details are already leaked or teased prior to the launch.

So, people start buying Apple stocks much earlier and the positive impact of the new release is already priced into Apple's shares way before the launch day.

Now, Apple has been so synonymous with innovation that even a product that is many times better than its predecessor is not enough to satisfy shareholders. So when Apple is unable to deliver another revolutionary product, the effect is seen in its stock price.

Seeing the stock price drop causes panic and more people sell, causing the price to fall further on the day of the launch!

But, does it affect Apple in the long term?

Now, in the long run, the iPhone launch event doesn't affect the stock price as much as say their quarterly revenue, cash flow and profit numbers.

In Q2 of 2022, Apple's revenue fell by 14.72% and its net profit numbers fell by 22.6%[5]. Plus, there were global supply chain problems, and rising inflation.

So, Apple's share price is affected significantly due to such pertinent reasons than a launch event.

Moreover, while Apple may have historically been the "iPhone company", it is moving strongly towards becoming a software company.

Apple's services business brings in ~$70 billion in revenue. That makes it Apple’s 2nd largest revenue maker, next to only iPhone. But the best part is that Apple makes ~64% profits on services vs. 32% on hardware devices!

Nonetheless, iPhone still is Apple's MAIN cash cow and contributes to 50% of Apple's revenue. So while it's unlikely that a launch event will have a long-term effect on the stock price, launch events will still be critical for the growth of the iPhone & Apple.

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