Apple (AAPL) announced two new products at their “Special Event” on Tuesday. As anticipated, the company unveiled an upgraded and redesigned iphone (iPhone 6 & iPhone 6 Plus), as well as a new product deemed the Apple Watch. Apple also announced a new NFC based payment system integrated into the iPhone 6. Naturally, the payment system is named “Apple Pay”.
Going into the 1PM Est event AAPL shares were trading at $100.41 with investors expecting a 4% move in the stock by Friday. The first hour of the event consisted of presentations introducing the iPhone 6, iPhone 6 Plus, and Apple Pay.
Investors seemed to be happy with the iPhone 6’s and the Apple Pay service as they pushed the price of AAPL up to a high of 103.08 at 1:58PM Est.
Around 2PM, Apple began demonstrating the Apple Watch. The feature packed watch looks classy and intuitive for consumers, but investors aren’t buying it. As Apple began demonstrating the watch, the price of AAPL proceeded to fall. By the end of the event, shares of AAPL were trading below $99 and ultimately closed the day at $98.
We love seeing Apple continue to push the smart phone market forward with yet another cutting edge iPhone release. The design is beautiful and with two separate models being offered Apple can continue to satisfy the general consumer market while also appeasing the advanced pro user market. Some worry that the 5.5″ iPhone Plus will cut into iPad sales, but it is important to note that Apple’s gross margin is about 15-20% higher on iPhones than iPads.
We also love seeing Apple cut into the e-commerce payment industry which reportedly includes $12 billion in US transactions a day. Apple Pay represents massive revenue potential and adds yet another diversified income stream to their day to day operations.
Investors are overlooking the good news from this event and putting too much weight on the Apple Watch product release. Yes, we are also upset that we cannot get the trendy watch until “early 2015” but we won’t let that cloud our judgment on the stock.
Apple Pay and the iPhone 6 are the shining gems of this event. Revenue growth does not appear to be slowing down anytime soon for Apple. The phone looks like another stunning addition to the iPhone line and these phones will be selling fast. Watch for Apple Pay to lead to huge revenues for AAPL while also taking swings at e-payment companies like eBay/Paypal (ebay) and Square.