Jon Erlichman

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Investors have high hopes for Apple’s 10th anniversary iPhone event. The Cupertino, California-based Goliath's stock price has easily outpaced the S&P 500 this year, rising nearly 40 per cent on expectations the company’s latest devices will deliver a fresh round of iPhone growth. 

If Apple can deliver, Wall Street analysts, on average, expect its stock price to climb another 10 per cent over the next 12 months. The most optimistic analysts estimate there could be another 30 per cent of upside, which would push the stock past US$200 per share. However, in three of the past five years, Apple’s stock has ultimately declined in the six-month period following an iPhone launch. 

Analysts are also closely watching for announcements about Apple TV and the Apple Watch — both could play key roles in shaping the company’s future, as Apple seeks to lessen its reliance on its flagship product.

Here are three things to watch carefully at Tuesday's announcement:

HOW MUCH WILL THE NEW IPHONE COST?

While Apple is expected to unveil upgraded versions of its current iPhone 7 and iPhone 7 Plus, most of the focus will be on its 10th anniversary device, which some have suggested could start at US$1,000. By comparison, the priciest model Apple currently has on the market (the iPhone 7 Plus) starts at US$769. Phone carrier contracts can lower the price tag, but carriers are increasingly getting tired of subsidizing iPhone costs.

The hefty price could already be weighing on the minds of would-be buyers. A recent survey of 400 U.S. iPhone users by Piper Jaffray found that 61 per cent of respondents do not plan to upgrade to a new phone this fall, compared to 56 per cent last year.

Optimists argue Apple can justify higher prices, thanks to the new bells and whistles expected to be unveiled, including an edge-to-edge OLED screen, wireless charging, cameras that use augmented reality tools, and face-scanning technology to replace Touch ID.

Additionally, Apple’s key rival, Samsung, is already testing consumer appetite for higher priced phones, with its most expensive Galaxy Note 8 device retailing at US$960.

Bottom line: The more people are willing to pay for a new iPhone, the higher Apple’s profit growth will be. According to Bernstein research, every US$10 increase in Apple’s average selling price for iPhones adds an additional 14 cents U.S. to the company’s earnings in 2018.

Wild card: China, where smartphone competition is fierce. The Chinese market makes up roughly 20-25 per cent of total iPhone sales. UBS optimistically estimates the new iPhone will boost sales in China by 30 per cent.

WILL THE NEW APPLE WATCH EXCITE CONSUMERS?

Apple is also expected to unveil a new watch. This latest version will reportedly have LTE cell service, meaning users won’t need to connect to an iPhone to make phone calls, send texts, or stream music.

Strong sales of the Apple Watch would help offset the company’s reliance on the iPhone, which made up nearly two thirds of its sales in 2016.

In August, CEO Tim Cook said Apple Watch sales in the most recent quarter rose 50 per cent from the previous year.  However, that still represents a small piece of Apple’s overall revenue. Apple Watch sales are part of a unit Apple calls “other products,” which includes Beats products, Apple TV devices, iPods, AirPods, and other accessories. In the most recent quarter, the unit represented roughly six per cent of Apple’s total revenue, while iPad sales made up more than 11 per cent of total revenue.

Bottom line: The growth potential for Apple Watch is certainly what has analysts most excited. Global shipments of wearable devices are expected to double by 2021, with sales topping 240 million units, according to research firm IDC.

WILL APPLE TV TAKE A PAGE FROM NETFLIX?

Apple is expected to announce a 4K-compatible version of its Apple TV set-top box. In the U.S., Apple currently trails Roku, Google (Chromecast), and Amazon (Fire TV) in total number of connected TV users. But with more than 21 million users (nearly 13 per cent of the market), there’s still a big opportunity to distribute original content, just like Netflix and Spotify.

At the start of this year, Cook said Apple hopes to double its services revenue, which includes digital content, over the next four years. As is the case with the Apple Watch, there’s a long road ahead before Apple can lessen its reliance on the iPhone. In the most recent quarter, iPhone revenue was nearly 3.5 times higher than what Apple generated from its services unit, which also includes the the App Store, Apple Music, Apple Care and iCloud storage.

While Apple TV sales are not included in its services unit, the devices are a key distribution point for Apple's digital content. And Apple has reportedly set aside US$1 billion to buy original film and TV programming, with one report suggesting Apple is competing with Amazon for the distribution rights to the James Bond movie franchise.

Bottom line: iPhone growth won’t continue forever. Apple could use its latest Apple TV announcement to shed light on its plans to become a big player in Hollywood.