- Andrew Burton/Getty
The general sentiment on Wall Street is that Apple’s annual Worldwide Developers Conference event in San Francisco on Monday was not groundbreaking.
As expected, the company announced software updates that will be available in the fall, with no news on updated hardware.
Apple unveiled iOS 10, with a smarter Siri, an emoji-centric iMessage, and a more intelligent Photo app.
Apple Maps and Apple Music also got face-lifts.
Many analysts on Wall Street liked the updates but did not think they meant much for the company’s stock in the near term. They are now looking ahead to the launch of the iPhone 7 and whether it will be able to turn around a slowdown in the device’s sales.
Here’s what they said after the event:
“The event was largely in line with expectations”: Sherri Scribner (Deutsche Bank)
Scribner and team said Apple’s changes were tweaks, not evolutionary changes that were big enough to affect the stock.
“Incremental, in our view, was the focus on machine learning capabilities, an area Apple has not highly emphasized in the past, but clearly a focus for the industry going forward. Redesigns of Apple Music and the WatchOS were expected, and necessary, in our view given lukewarm reviews.”
“These announcements demonstrate Apple’s desire to deliver the best quality compute experience across its devices”: Kulbinder Garcha (Credit Suisse)
“We continue to believe that the current risk/reward is attractive for Apple, as we expect its Services business to more than double from ~$14bn in 2015 to ~$34bn by 2020,” Garcha wrote.
“Given high retention rates, a superior ecosystem, and a multi-product compute advantage, we believe FCF of ~$67bn should be sustainable long term. We reiterate our Outperform rating and $150 TP.”
“Apple Pay has completed the commerce trifecta: In-store, in-app and in-browser”: Josh Beck and Ankit Kapoor (Pacific Crest)
The two most surprising announcements were the expansion of Apple Pay to the desktop and the inclusion of third-party apps like Square Cash for iMessage, they said.
“Based on the WWDC demonstration, which featured a macOS checkout scenario via an iPhone fingerprint, and the updated language at the website: ‘Coming this fall… …Apple Pay is coming to Safari on your Mac, iPhone, and iPad,’ we believe Apple Pay is likely to be available across desktop and mobile browsers this fall.”
“Our Apple analyst Andy Hargreaves expects a fairly strong take-up, with the potential for nearly three-quarters of users to have the updates almost immediately.”
“We expect shares to remain range bound as data points during the seasonally slow summer and ahead of iPhone 7 launch”: Jim Suva (Citi)
Suva said shares would not move significantly since there would not be much action until the iPhone 7 launch. Yet amid a slowdown in iPhone sales, investors realize that Apple can still gain share in large markets like India.
“While some investors may ask if Apple is the next cell phone company to peak and decline, we do not believe so as we watch the company’s installed base growth which was a leading indicator for past examples of consumer electronic peak to fail turning points.”
“The event highlighted even more seamless integration across AAPL devices/platforms as it further bolsters the attractiveness of the ecosystem”: Timothy Arcuri (Cowen)
“Apple is creating a seamless platform where information is accessible and seamlessly moved between iPad, iPhones, and Macs,” Arcuri said. “This could lead to greater ecosystem tie in and help to cross sell macs and iPads to current iPhone users.”
“The announcements were consistent with our preview/broader expectations and thus unlikely to be stock-moving in the near-term”: Simona Jankowski (Goldman)
“Additional announcements included (1) an app delivering Siri remote functionality on the iPhone, (2) Siri search on YouTube, and (3) automatic sharing of downloads between Apple TV and the iPhone,” Jankowski said.
“There was no mention of original content, which Apple is reportedly working on with Dr. Dre, co-founder of Beats Music (acquired by Apple in 2014), per the WSJ and other industry sources.”
“While the platform enhancements were impressive we see the short term earnings impact of the day as immaterial with investor focus likely to continue to be on iPhone sales in H2”: Rod Hall (JPMorgan)
Apple’s focus was on software, but Hall, like many others, had expected an update on the MacBook Pro, which was last refreshed over a year ago.
“iOS 10 should retain Apple’s UI lead”: Jeffrey Kvaal (Nomura)
Kvaal said the announcements represented a “new era of openness” for Apple.
“As expected, Apple opened Siri, Phone, Messages and Maps to third party developers, a move we view as spurred by competition from Amazon and Google’s own virtual assistant efforts.”
“While Siri is already integrated with Yelp and OpenTable, the Siri SDK will now be available for apps such as WeChat, Slack and WhatsApp.”
“We believe the updates keep Apple’s hardware and software ahead of competition from Android, Amazon and Windows”: Gene Munster (Piper Jaffray)
One area in which competitors lead is artificial intelligence in messaging, since the likes of Facebook have developed chatbots.
“We remain positive on shares on our belief that the iPhone 7 cycle will enable a return to unit and revenue growth even if the cycle is flat from iPhone 6, with the easiest comps in Mar-17 and Jun-17,” Munster said.
“Throughout its presentations, Apple focused on the inherent privacy of its softwareand systems in a clear dig at Google”: Tavis McCourt (Raymond James)
- Raymond James
McCourt also noted that Apple’s developer eco system was large and growing.
“For the first time, we’re going to talk to you about four Apple platforms”: Steven Milunovich (UBS)
“We recently asked if Apple gets platforms,” Milunovich wrote. “Apparently it does based on the litany of technologies being opened up to developers, including Siri, Maps, and Messages.”
Milunovich added that providing APIs to developers allows them to write apps to Apple’s operating systems and innovate outside the company.
“There are machine learning and chatbot wars developing in which Apple is perceived to be lagging,” Milunovich wrote.
But chatbots could reduce Apple’s interface advantage, he said.
“iPhone shipments have not peaked”: Maynard Um (Wells Fargo)
Um expects shipments to increase year-on-year in December 2016.
“While the lack of new hardware could be viewed as a disappointment, new hardware across the portfolio could be coming with the new iOS, WatchOS, MacOS, and tvOS updates in the fall, setting up for the holiday season.”
“Apple is clearly behind some of its competitors in its AI efforts and integration with third parties”: Ben Schachter (Macquarie)
“We expect to see more progress this year, but will likely have to wait until iPhone 8 for more significant improvements,” Schachter wrote.