Look, the iPhone 8 is probably going to be a really great smartphone. Recent advances in technology are making no-bezel smartphones with zero physical buttons a reality; add that to steady increases in power, battery life and camera tech, and it’s safe to say that the iPhone 8 (or whatever it ends up being called) will be the most pleasurable six-inch device that anyone’s ever fondled.
But the hype train is getting a little silly. It’s only Tuesday, but we’ve already had two analyst notes come out that project Apple shares going to stratospheric new highs, based mostly off an assumption that the iPhone 8 will be the second coming of Steve Jobs.
According to MarketWatch, Credit Suisse has increased its stock price target for Apple to $170. The shares are trading for $141 today. RBC Capital Markets also has its estimate up this week, to $157. The market consensus target price — basically a best guess from a bunch of analysts — is $150 right now.
The strange thing is that Apple’s current stock price, and these bloated estimates, are all riding on some kind of magical iPhone 8 launch. Apple’s stock was trading at around $115 in October last year, shortly after Apple launched the iPhone 7. Since then, nothing has actually happened for Apple’s market cap to increase by $140 billion — that’s billion with a B! — apart from rumors about a mystical new phone.
Going off what we know now, the iPhone 8 (or iPhone Edition, or iPhone X) will have a zero-bezel display, some kind of fingerprint reader hidden under the glass, a dual-camera setup and possibly an iris sensor. That all sounds expensive, which is a real problem for the analysts and their sky-high estimates.
The reason Apple does so well profit-wise compared to Android manufacturers isn’t just that it can sell in bulk — it’s that it makes crazy profits on every single iPhone it sells. It can do that thanks to negotiating good prices with suppliers, but it also just doesn’t spend as much on parts as other manufacturers. But if the rumors are true, the iPhone 8 will be far more expensive to produce than any previous iPhone.
So, Apple will either have to take a bite out of its own profit margins (anathema to investors), or raise the price of the iPhone 8, potentially even to $1,000. Looking at Apple’s stock target price, it looks like investors are banking on the iPhone 8’s features to drive millions of people to upgrade. If the price is that high, you can bet that sales will be lower than expected, and in turn, Apple’s profits won’t be so high.
I’m not even remotely trying to say that the iPhone 8 will be a flop. But in the last six months, based off supply-chain rumors and hype, Apple’s somehow become $140 billion more valuable. Maybe we should just wait a little.
