Apple’s new AI features may not be the only factor driving iPhone upgrades. Deals offered by the major U.S. cell phone carriers play a hand in device sales, as well. AT & T, Verizon and T-Mobile have announced their respective offers for customers who want to trade in their current phones for the new iPhone 16, which has been hyped up for its ability to run Apple’s upcoming suite of artificial intelligence features. These promotions – made public after Apple’s September product event on Monday – can boost sales for the tech giant by making its flagship device more affordable for users, while marketing to a huge network of people. Among the offers at AT & T for new and existing customers: a free iPhone 16 or up to $830 off the iPhone 16 Plus if they meet a few eligibility requirements. The lineup of deals at Verizon and T-Mobile include a free iPhone 16 Pro for certain customers who trade in their devices and have specific coverage plans. Apple’s list price for the Phone 16 and iPhone 16 Plus start at $799 and $899, respectively. The higher-end Pro and Pro Max models start at $999 and $1,199. “It’s so clear that the [iPhone] price will be dictated by T-Mobile, AT & T and Verizon,” Jim Cramer said Tuesday, underscoring the important role these carriers play in sparking demand for the devices. The reason: More often than not, iPhone users buy from cellphone providers rather than Apple directly — likely because it’s easier for the everyday consumer to stomach trading in their current device to avoid footing the full bill for a new one. A 2022 survey of iPhone buyers found that only 24% of people purchased their devices directly through Apple, Consumer Intelligence Research Partners said at the time . Apple does not disclose this information. These annual bargains and financing deals from T-Mobile, AT & T and Verizon can convince Apple users who may not otherwise feel a pressing need to upgrade. It’s been a positive for Apple. “I think subsidies always help,” Apple CEO Tim Cook said on an earnings call a few months after the 2020 launch of the iPhone 12, the first version to support 5G wireless networks. “Anything that reduces the price to the customer is good for the customer and obviously good for the carrier that’s doing it and good for us as well,” Cook explained. “It’s a win across the board.” AAPL YTD mountain Apple (AAPL) year-to-date performance The promotional offers for the iPhone 16 are largely in line with those offered for last year’s iPhone 15, analysts at UBS and Bernstein said in notes to clients. AT & T CEO John Stankey echoed these sentiments. “I was looking at the offers in our industry that popped up yesterday after the announcement,” Stankey said in an interview Tuesday on CNBC . “They look pretty similar to last year.” That is about what the Club expected to see. Now consider that despite inflation, Apple left the prices of iPhone 16 models the same as the prior generation while adding AI capabilities and improved battery life, among others. Against that backdrop, it’s welcome news that carrier subsidies are roughly as enticing as they were last year. Of course, we would’ve loved if they were more aggressive than a year ago, knowing some consumers are feeling pinched, but this is not a bad outcome when looking at the big picture. To be sure, some Wall Street analysts aren’t expecting a step up in upgrades driven the trade-in offers. “Broadly, we do not believe that the promotions are enough to drive customers to upgrade at a different rate [versus] last year,” KeyBanc Capital Markets said in a Tuesday note to clients. Likewise, UBS analysts said the telecom deals are “unlikely to drive demand” on their own. Apple shares edged lower Tuesday as investors took in some downbeat commentary from analysts on the company’s product launch event. “We don’t view the AI-related offerings as compelling enough in the near term to drive significant demand, given macro risk in China and regulatory hurdles in Europe and China, limiting geographic reach of Apple Intelligence,” analysts at Barclays wrote to clients. The firm is a notable bear on Apple, with an underweight rating on the stock all year long . Our thesis on Apple is unchanged. We maintain the iPhone 16 is the start of a new extended upgrade cycle , fueled in part by new AI features and complemented by improved capabilities to the devices overall, such as better battery life and camera improvements. “All of these things will be incremental, just enough to eventually convince millions” to upgrade their devices, Jim said. “This cycle is not going to be one quarter or two,” added Jeff Marks, the Club’s director of portfolio analysis. “It will be a multiyear cycle because people are going to need to upgrade to these newer models over time.” (Jim Cramer’s Charitable Trust is long AAPL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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Apple CEO Tim Cook delivers remarks before the start of an Apple event at Apple headquarters on September 09, 2024 in Cupertino, California.
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Apple’s new AI features may not be the only factor driving iPhone upgrades. Deals offered by the major U.S. cell phone carriers play a hand in device sales, as well.
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