Guggenheim Dishes Out Key Insights on Apple (AAPL)

Guggenheim's Rob Cihra chimes in on Apple's latest moves unleashed at its annual global event for developers.


At the developers’ event of the year that has Wall Street buzzing, Apple Inc. (NASDAQ:AAPL) and its Worldwide Developers Conference (WWDC) have one bull out sharing key takeaways. In a positive research note, Guggenheim analyst Rob Cihra surveys a future where Apple takes steps to evolve software into “social” territory and tackles new artificial intelligence (AI) and EDGE moves forward in Siri to ARKit to Core machine learning (ML).

As such, the analyst reiterates a Buy rating on AAPL stock with a $215 price target, which implies a 11% upside from current levels. (To watch Cihra’s track record, click here)

In the tech titan’s two-hour keynote, AAPL offered a glimpse into forthcoming refreshes to its core OSes. First, the company intends to render iOS “more ‘social'” by taking advantage of iMessage communications along with a “loyal installed base,” cheers Cihra. This will translate to new Group FaceTime, multi-user AR, Photos sharing, as well as iMessage Memoji. Second, the titan points to plans to develop standalone AI as well as ML computing capabilities, including the likes of Siri Shortuts and a refresh on Core ML for on-device interference, using new Create ML for training. Third, Apple will opt to emphasize “differentiation” through privacy and security, where iOS 12 will allow the titan to get a launch in motion pointing to new iPhones come fall.

One strong point for the company’s platform is an App Store now tracking over 500 million visitors each week, with developers realizing a monster $100 billion from apps sales to date. The majority of Apple’s more than 1 billion active users, or 81% have updated to the newest iOS version, compared to merely 6% of Android users on the most recent release, which Cihra deems “a big draw/differentiator for developers.” The AAPL team looks for iOS 12 to make speed and response times better in camera and apps launch, while also underscoring a more robust performance on older iPhone and iPad hardware as far back as from 2013.

Slow and steady wins the race, and in terms of AI to ML, the analyst sizes up a tech titan who keeps “surely” improving Siri, which currently processes over 10 billion requests every month in bringing new Shortcuts to the table that “effectively make it work with any app.” Additionally, the tech titan is making the most of on-device AI to boost Siri’s speed. For instance, Cihra pays note to the Siri watch face in watchOS that is getting an update to utilize ML to dish out further “predictive” as well as “proactive shortcuts, considering user intel from routine to location to health data.

The analyst highlights, “Although not explicitly called out by the company, our own belief is that Apple will increasingly pursue more on-device EDGE processing of AI/ML as a unique differentiator vs. the strengths of most of its competitors being in cloud-based services (e.g., Siri uses the cloud but 3D sensing/Face ID processed locally), given that Apple owns both its software+hardware, including high-end A-series processors (e.g., dedicated ‘neural engine’ added last year), camera/computer vision, sensors and other multiple sources of local computing horsepower.”

Meanwhile, the ARKit 2 adds to last year’s introduction for developing AR apps thanks to a slew of enhancements. The analyst spotlights new tools to bolster shared and multi-user experiences along with a new open file format “usdz” that makes it possible for AR to cross over to iOS apps, including the likes of Messages, Safari, and Mail.

The company’s refresh to macOS ‘Mojave’ brings a grouping of new features at play along with apps now stemming from the iOS-verse, beginning with News, Stocks, Voice Memos, as well as Home- for Mac users to have the option of calling the shots on HomeKit-enabled smart home devices. Apple offered a peek into a fresh framework poised for the tail-end of next year that will give developers the ability to simply port iOS apps to macOS. Additionally, the tech titan intends to give an absolute remodel to its Mac App Store “look.”

Lastly, “Focus on user Privacy/Security continues to permeate all Apple software and services in something of a purposeful contrast to most of its Cloud Services competitors, with updates to Safari, for example, adding new capabilities to block user tracking and blur device identification by advertisers,” surmises Cihra.

TipRanks exhibits caution looming over AAPL shares with a hint of positivity baked into target expectations. Out of 28 analysts polled in the last 3 months, 15 are bullish on AAPL stock while 13 remain sidelined. With a return potential of nearly 2%, the stock’s consensus target price stands at $196.75.

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