Apple’s big Worldwide Developers Conference was on Monday, and Wall Street analysts came away less than surprised at what was announced.
And notes following the event, several Wall Street analysts came up with the same jargon-y catchphrase to characterise the event, calling it “evolutionary,” not “revolutionary”
On Monday, Apple mostly unveiled updates for existing products without announcing any new or groundbreaking hardware.
At the event in San Francisco on Monday, Apple unveiled Mac OS X Capitan, iOS 9 for iPhones and iPads, software updates for Apple Watch, and a subscription service called Apple Music.
There was no expectation for Apple to announce anything extraordinary, and that’s exactly what happened. In response, the stock traded in a tight range during and after the event.
Goldman Sachs analysts are looking ahead to new product launches in the fall, and wrote:
“The keynote announcements were largely in-line with expectations. We would characterise the Mac OS and iOS updates as more “evolutionary” than “revolutionary” in nature, although we do view the watchOS release
as an important push toward the maturation of the device.“
Deutsche Bank analysts were impressed by the new Apple Watch OS, although they also hoped for an update on how many watches have been sold.
Overall, nothing was particularly shocking for them. They wrote:
“Most of the announcements were in line with expectations heading into the event, and the operating system enhancements were generally evolutionary as opposed to revolutionary in our view … Overall, we felt the event provided some positive new features and we view Apple Music as interesting, but we didn’t feel anything announced during the keynote was incremental enough to impact the stock.”
Morgan Stanley analysts noted that Apple did things differently, and not only in putting a woman on stage. Instead of running through key metrics at the top of the event, its simple message was “everything is going great.”
But weaved into the event were some key numbers that the analysts found helpful, including a nearly 1 billion user base (versus 800 million reported in April 2014,) Apple Pay being used at one million locations, and 100 billion downloads on the App Store with $US30 billion in payments to developers.
The biggest news everyone expected from Apple was on Apple Music, and Morgan Stanley estimated how much it would add to the company’s bottom line in the coming year:
“A billion people will have access to Apple Music via the iPhone, iPad, iPod touch, Mac and PC starting June 30. Every 1% penetration of Apple’s customer base equates to 0.5% revenue
growth and $US0.02 EPS in FY16, with Apple targeting an aggressive 10% penetration according to the Associated Press.”
PiperJaffray estimates that Apple Music will add less than 1% to revenue in 2016. Their overall assessment of everything Apple unveiled is bullish for the stock:
“While WWDC lacked a blockbuster announcement, the combination of many incremental product innovations to iOS, Apple Pay and Apple Music add up to a better user experience, which we believe will allow Apple to continue to gain share in the high-end smartphone market, PC market and wearables market. This translates into increased confidence that Apple can meet Street growth rates for the next year plus (Street at 6% growth in FY16). We expect shares of AAPL to move higher as investors increasingly
think about the company as an annuity hardware business.“
Apple shares were lower but little changed in premarket trading, after closing down less than 1% at $US127.80 on Monday. Shares are up 38% year-to-date.
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