Last week, Apple (AAPL) announced its biggest product redesign in years… the iPhone Duo.
The Duo is Apple’s first foldable smartphone. Closed, it’s about the size of a passport. But it unfolds into a 7.6-inch display, similar to a small tablet.
Tech blogs are already buzzing over Apple’s new offering… as well as its record-setting price tag. At $1,999 for a base model, the Duo is Apple’s most expensive smartphone to date.
The Duo arrives about seven years after the first foldable smartphones hit the market. But Apple is positioning the phone as a new flagship device…
During the launch event, Apple’s new CEO, John Ternus, said the Duo “redefines what it means to use a foldable phone.”
Whether the Duo will be a hit with consumers remains to be seen. But “Mr. Market” seems to love the device…
The iPhone Duo Is Already Defying Investors’ Expectations
Many traders tend to “buy the rumor and sell the news”…
In other words, they buy stocks ahead of exciting events or big announcements… and sell as soon as the story comes out.
Apple products have a history of flat to mildly negative reviews when they debut. And now the company’s stock is giving us another great example.
The iPhone Duo launch was characteristically muted. AAPL fell less than a percentage point on the day the foldable phone was announced.
But the next day, we got a more interesting signal. Apple jumped 3.6% – on a day U.S. stocks fell 0.58%.
But I wanted to put that two-day reaction into a little more perspective… so I compared it with Apple’s performance the day after past product launches.
To strip out market noise, I subtracted the S&P 500 Index’s performance for each launch period. (If Apple and the S&P 500 were both up 2% in a day, I chalked that up to market drift and counted it as 0% outperformance. But if Apple was up 2% and the S&P 500 was up just 1%, I recorded next-day performance as 1%.)
Check out the results…
This test uncovered a few interesting data points…
First, “selling the news” tends to continue the day after Apple reveals new tech. In seven of its past 10 product reveals, Apple sold off the next day.
But before the Duo, the three products that did spark a rally are notable… the iPhone itself, the original iPod, and the Apple Watch. These announcements scored next-day outperformance of 4.6%, 4.4%, and 2.7%, respectively.
All three products were category killers that wound up doing massive business for Apple…
And on September 10, the iPhone Duo joined their ranks.
The day after the Duo announcement, Apple outperformed the S&P 500 by nearly 4.2%. That marks Apple’s third most bullish product launch in 26 years.
Put another way, based on the next-day market reaction, Apple hasn’t had a win this big since the first iPhone.
So if your reaction to the iPhone Duo is bearish, it’s worth reconsidering. This device is proving to be a rare “buy the news” moment that we’ve only seen a few times in 26 years.
One day of outperformance doesn’t make the Duo a success. But if the early verdict is any indication, Apple has a massive hit on its hands.
Good investing,
Sean Michael Cummings
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Source: Daily Wealth
