What Jony Ive’s Departure Means for Apple’s Stock
Could Jony Ive’s departure take a big bite out of Apple?
Apple seemingly surprised Wall Street on Thursday with the news that its longtime chief design officer Ive is leaving the company. The news pushed Apple’s stock down about 1% in after-hours trading, and bearishly kept it down about 0.50% as of intraday trading on Friday.
Ive, who has been at Apple for nearly 30 years, plans to start his own design company, LoveFrom. But the designer’s impact on Apple seemingly can’t be overstated. Dan Ives, managing director of equity research and analyst at Wedbush Securities, calls Ive “a legend who helped shape Apple’s brand to where it is today.” In a similar sentiment, Cowen analyst Krish Sankar believes the departure is “disadvantageous” for the company, he wrote in a note.
Apple announced that design team leaders Evans Hankey, vice president of industrial design, and Alan Dye, vice president of human interface design, will dually take over Ive’s spot. But the lack of a new chief design officer has some analyst skeptical—Wedbush’s Ives even calls it a “pseudo-demotion for that team.”
Still, Ive isn’t leaving cold turkey. According to Apple’s CEO Tim Cook, Ive will continue playing an integral role in the company—just not within it.
“After so many years working closely together, I’m happy that our relationship continues to evolve and I look forward to working with Jony long into the future,” Cook said in a company statement.
But to Wedbush’s Ives, Ive’s departure came at an “inopportune time.” He says the exit only adds to Apple’s current concerns around China and, most recently, the G20 summit in Osaka, Japan.
It’s certainly not news that Apple is having trouble in China. The company reported a relatively hefty decline in sales in China during the 2018 holiday quarter—nearly $ 5 billion less than the previous year. And with the threat of tariffs hampering their business further, analysts say Apple may be in trouble.
“From a stock look, the company has their back against the wall, not just on some near-term issues with U.S.-China and some other headwinds, but a lot of it just comes down to a more mature smartphone industry, and it’s all about innovation and services,” Ives told Fortune.
While Ives claims both the news of Ive’s exit and escalating China tensions could put pressure on the stock, he believes “if we don’t get the $ 325 billion tariffs, then ultimately the bark was worse than the bite for Apple.”
A shift in direction?
Ive’s departure signals a noticeable shift, as Cowen wrote that the company is in a “transition from being focused on hardware products to services and content.”
Apple’s push to offer streaming services (perhaps to Netflix’s chagrin) and more services through its acquisition of self-driving car start-up Drive.AI show a clear path forward. And Wedbush’s Ives thinks the company may become more “aggressive” with M&A. He believes the acquisition of a major studio (Ives notes Sony Pictures, MGM or Lionsgate as candidates) may be in Apple’s sights.
Still, apart from developing content and services in the near-term, Ive’s departure isn’t the first big loss for Apple this year. The company’s former retail chief Angela Ahrendts left in April—and may indicate a worrying trend.
“It’s a bit of a worry in the fact that Angela and Jony were viewed as potential heir apparents to Cook over the coming years,” Ives says. “With them gone, I think there’s obviously not as deep of a bench behind Cook, and I think Apple is going through a transition.”
But analysts say investors shouldn’t be too concerned over Ive’s departure.
For Wedbush, Apple’s loss isn’t enough to warrant a change in their price target (which currently sits at $ 235 per share). And others at Evercore ISI and Nomura Instinet aren’t too worried.
“It’s not an overarching worry that’s going to significantly pressure the stock, but it definitely adds a little more risk into the story around innovation,” Ives said. “You can’t replace a Jony Ive—in my opinion, in the last 30 years, he’s a top 5 mind in the technology world, along with Jobs, Gates, Bezos and just a few others.”
But for some, the executive’s departure should “prompt much nostalgia” for investors, and perhaps lead them to question “Apple’s ability to retain leading industrial design,” as Nomura Instinet’s Jeffrey Kvaal wrote in a note.
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