I was expecting the iPhone 7 to be an underwhelming phone, however it seems like Apple Inc. (AAPL, Financial) caught a lucky break. The iPhone’s primary rival—Samsung’s Galaxy Note 7—was supposed to be a tough competitor. However, after numerous incidents of the phone exploding, Samsung (SSNLF, Financial)Â decided to halt the production of the flagship device. Apple has benefited considerably from the recent event as the stock has stayed above $110. However, will the production halt of the Note 7 really benefit Apple as much as people are expecting? Probably not.
There was no Note 6
Although the production halt of the Samsung device is a tailwind for Apple, that does not mean the Cupertino giant will benefit as much as people are expecting. The primary reason why I think Apple will not benefit as much is that there was no Galaxy Note 6 last year, yet the iPhone 6S struggled to generate as much buzz as its predecessor.
In addition, Samsung also launched the Galaxy S7 earlier this year and the device has reportedly outperformed its predecessor by a wide margin. So, this year is exactly like the last year, with the latest offerings of both the iPhone and the Galaxy S series squaring off against each other.
Since the smartphone market is not growing much this year, the growth in sales of the Galaxy S7 could easily lead to a reduction in Apple’s market share. Although the Apple will benefit from the Note 7 fiasco, the gain may not be as much as many people are expecting.
Wall Street analysts are probably expecting the same thing, which is why they expect Apple’s revenue to grow just 2% on a year over year basis. While Apple benefited from the Note 7 fiasco, the tailwinds are currently baked into the share price. With the smartphone market having peaked, I do not think investors should consider buying Apple right now.
Final words
Due to the reasons mentioned above, I do not think Apple will gain considerably from the Note 7 being taken off the market. Whatever benefit the company may incur is already baked into the stock, which is why I think the buying Apple is not a good idea right now. Moreover, with the smartphone market saturating and Samsung’s Galaxy S7 being a hit, the chances of Apple’s revenue dropping year over year are really high.
DIsclosure: No position.
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