Article in Game-Changers category.
Do AAPL Stock Prices Always Fall Before an iPhone Announcement?
Does Apple stock (AAPL) always drop the day before an iPhone release? Our data set challenges the conventional wisdom, saying it falls only 58% of…
Within investor and tech circles, conventional wisdom holds that when Apple announces the release of a new iPhone, AAPL stock will likely fall the day of the announcement and rise the day after. You could set a clock to the commentary around stock performance, which follows the same formula and appears to adhere heavily to a Kensho analysis in 2016. From CNBC in September of last year: “Apple ends the day negative 80 percent of the time, new data from Kensho's Bhavesh Dayalji and CNBC's quantitative analysis team show. But the day after the iPhone announcement, Apple is positive 70 percent of the time by an average of almost 1 percent.”
That Assumption Isn’t As Rock-Solid As You Think
Comparing the close-of-day price on announcement day versus the day after an announcement for the first ten iPhone announcements (the original iPhone through the iPhone 7), four have preceded a fall in the stock price the following day (iPhone 3GS, iPhone 4, iPhone 5C/CS, and iPhone 7), while five saw a rise in the stock price the day after (iPhone, iPhone 3G, iPhone 4S, iPhone 5, iPhone 6/Plus, iPhone 6S/Plus, iPhone SE).
With regard to the iPhone 8 and iPhone X, both announced on Tuesday, September 12, 2017: “AAPL stock price deviated from its expected course; on the day it usually rises (70% of the time according to Kensho), the day after the event, the stock plopped.” (CNBC)
So the stock went up the day of the announcement, and down the day after — the reverse of what “usually” happens.
Does Apple Stock Always Drop Before an Announcement?
Let’s look at this a little more closely. The heavily-referenced Kensho data tracks iPhone announcements and AAPL stock prices only through the iPhone SE in 2016, so adding in the iPhone 7 announcement, as well as the recent iPhone 8 and X announcement, would give us a new data set comprising all 12 iPhone announcements together.
Using this new data set, we can answer the question: Does Apple stock always drop the day before an iPhone announcement and rise the day after? In fact, this is only slightly more likely to be the case than the reverse. The day of an announcement shows 58% occurrence of a drop in stock price, rebounding the day after, while there is a 42% occurrence of the inverse. In other words, seven iPhone announcements resulted in AAPL stock going down the day of and up the day after, and five announcements saw AAPL stock going up the day of and down the day after (my own calculations using available data).
The Longer Trend for Apple Is Simple: Up
Why the almost-predictable drop and then uptick is the result of other market factors as well as human psychology in trading. Each change in stock price around the time of an iPhone announcement has just a lot of chatter about the causes either way — and whether to buy, sell, or hold — but there is no single, steadfast explanation why.
Tracking this curiosity from the first iPhone announcement of June 2007, Investor Place notes, “Since then, AAPL stock is up some 600% on a split-adjusted basis, and its chart shows a steady upward march with a couple deep valleys when zoomed out to 10 years of history.”
So, really, whether the stock will go up or down on the day before, of, or after a new iPhone announcement has pretty much been blips in an overall upward trajectory.
When Will the AAPL Stock Run End?
The better question, if you’re going to invest in Apple, is whether the Apple X going to be the next big thing — and at what point, if ever, will Apple run out of steam with iPhone announcements? Seeking Alpha, a market news site, is betting that the run will keep going with Apple X, even with the much higher price tag. Meanwhile, CNBC is making claims that even with the stock price at historic highs, incredulously, now may be the time to buy.
Whether you buy, hold, sell or just watch from the sidelines, it seems that Apple still dominates the market and tech sphere when they announce their new products. The long and short of it is that this technology juggernaut still has wings.
For an interesting assessment of the current APPL price and discussion on future activity, check out the full Forbes analysis.