Apple’s 2022 iPhone Revenue Growth Likely Incremental

On Sept. 14, Apple AAPL held its annual product showcase, where the firm announced the launch of a new iPhone, iPad, and Apple Watch. Similar to last year, Apple launched four new iPhone models: the iPhone 13 ($799), iPhone 13 mini ($699), iPhone 13 Pro ($999), and iPhone 13 Pro Max ($1,099), with pricing consistent with equivalent models from the prior year. Beyond the typical chip, battery, and camera enhancements, we equate many of the updates to those of past iPhone "S" models that were more incremental in nature. While 5G penetration remains in the early innings, we think Apple's fiscal 2022 iPhone growth is likely to be more muted than the growth implied by the current stock price. We are maintaining our $124 fair value estimate for narrow-moat Apple. Battery life continued to expand, thanks to the new A15 Bionic chip, which is manufactured on TSMC's 5-nanometer process technology that leverages EUV lithography. For the A15, Apple claims a greater than 50% performance advantage over any other competing mobile chip, while the iPhone 13 boasts 2.5 hours more battery versus the iPhone 12. The Pro has three cameras (ultra-wide, wide, and telephoto), with base and mini models having a dual-camera setup. The emphasis on camera features is consistent with our expectations, with Apple highlighting the "cinematic mode" with greater depth and focus capabilities. The iPhone 13 will launch into 60 countries/regions with 5G support, while the Pro models' storage will go up to 1 terabyte for an additional $500 relative to the 128-gigabyte base version. We expect Apple's fiscal 2021 iPhone sales to surpass the $190 billion threshold, which would imply about 39% year-over-year growth. Although 5G-related momentum should persist into next year, we're modeling only 4% iPhone revenue growth for fiscal 2022.

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