Apple Inc. (AAPL) WWDC Highlights: Analysts Weigh In


Apple Inc. (NASDAQ:AAPL)’s annual Worldwide Developers Conference is almost over and Apple fans everywhere are reeling with excitement from all of Apple’s new announcements and updates. Here are some of the biggest highlights from WWDC so far:

Apple Music:

The announcement of Apple Music was easily what everyone was most excited for at this year’s WWDC. Last year, Apple acquired headphone company Beats by Dre for $3 billion. The technology giant teamed up with Beats by Dre to develop a subscription based music streaming service to compete against existing streaming services like Spotify and Pandora. To differentiate itself from the competition, however, Apple Music includes many different ways to listen to music all in one application.

Not only does Apple Music stream music, but it also streams music videos, has a variety of programmed playlists, has a 24/7 worldwide radio station called Beats One, and has a social media-like platform called ‘Connect’ that allows users to follow their favorite artists. Rapper/musician Drake, who introduced Apple Music at WWDC, described the app as “something that simplifies everything for the modern musician like myself, and the modern consumer like you.”

Apple said it will charge $9.99 a month for a personal Apple Music subscription and $14.99 for a family plan. Apple Music is believed to turnaround the company’s descending iTunes revenue as streaming audio music gains more popularity.

Cowen & Co analyst Timothy Arcuri, who currently has an Outperform rating on Apple with a price target of $140, sees Apple Music “as a meaningful improvement to iTunes Radio and one that more easily could box out competing services when the app is pre-loaded on AAPL devices.” In the grand scheme of things, he considers Apple Music as “another small step in AAPL’s evolving software and service platforms as the company drives long-term ecosystem lock-in.”

Timothy Arcuri has rated Apple 28 times since September 2013, earning an 89% success rate recommending the company and a +31.5% average return per AAPL recommendation. Overall, He has a 61% success rate recommending stocks and a +16.8% average return per recommendation.

iOS 9:

Apple’s new operating system, iOS 9, has several new features but primarily focuses on elongating battery life and enhancing security features. Improvements include public transit directions in Maps, a newly designed News application to show more relevant content to users, and new formatting options for Notes. Furthermore, Siri has been updated to provide proactive assistance and will automatically add events and reminders to the Calendar. Many users are most excited for the new split-screen feature on the iPad, which will instantly separate and stack all open applications so users can multitask, or quickly view several windows at once. The iOS 9 update will be accessible on all iPads and iPhones that currently run on iOS 8. The update will be available in beta for developers in July and will be available to the public in the fall.

On June 9, Oppenheimer analyst Andrew Uerkwitz reiterated an Outperform rating on Apple with a $155 price target. Uerkwitz noted, “investors shouldn’t overlook the multitude of tweaks Apple made to its OS.” In his view, the iOS updates will further separate Apple’s ecosystem from the competition. The analyst added, “Apple will continue to outperform smartphone sales expectations… Arguably there is even upside to our numbers with the addition of Apple Music and a rejuvenated iPad interface.”

Andrew Uerkwitz has rated Apple 20 times since May 2014, earning a 77% success rate recommending the stock with a +13% average return per AAPL recommendation. Overall, Uerkwitz has a 61% success rate recommending stocks with a +6.3% average return per rating.

OS X El Capitan:

Apple’s new software for Macs boasts several new features, but mainly focuses on improving user interactions with the interface, specifically regarding performance and experience. The Spotlight feature will now display a wider array of results when conducting a search, drawing results from stocks, weather, web videos, and transit. Users will now be able to incorporate outside files into Notes by simply dragging and dropping PDFs, videos, and files into the application. While accessing Safari, users will have the ability to mute audio from any tab so automatic videos within tabs will not disrupt the user. The Mission Control update to El Capitan gives users a cleaner interface and allows them to create a clean area on the desktop when it gets cluttered with too many open tabs. The developer preview of El Capitan is already available for developers and the general update will be made available in the fall.

Cantor Fitzgerald analyst Brian White reiterated a Buy rating on Apple with a $195 price target following WWDC. White noted that El Capitan sets the stage for the next iPad update with “new features for the iPad such as Slide Over, Split View and Picture-in-Picture set the stage for the 12.9-inch ‘iPad Pro’ that we expect to launch over the next 6-10 months.”

Brian White has rated Apple 110 times since October 2010, earning an 82% success rate recommending the stock with a +29.5% average return per AAPL rating. Overall, White has a 73% success rate recommending stocks with a +18.5% average return per recommendation.

Apple Wallet:

Apple announced the next step for Apple Pay, called Apple Wallet, which will formally replace Passbook. Apple Wallet now lets users add store cards, loyalty cards, and reward cards in their wallet in addition to debit and credit cards. Apple wallet will also notify users of the best card to use depending on where the user is shopping.

In addition, Apple Pay will now be accepted at one million US locations and will also be made available in the United Kingdom starting next month. Apple Pay will work with 70% of the UK’s debit and credit cards and be accepted at 250,000 locations throughout the UK when it launches in July.

Piper Jaffray analyst Gene Munster maintained an Overweight rating on Apple with a $162 price target on June 8 in light of Apple’s announcements at WWDC. Munster viewed the Apple Wallet announcement as “largely in line with expectations” and predicts in the long-term, “Safari payments and peer-to-peer payments to be the next evolution of Apple Pay, which [he believes] could happen in the next 1-2 years.”

Gene Munster has rated Apple 142 times since January 2009, earning a 79% success rate recommending the stock and a +30.7% average return per AAPL recommendation. Munster currently has an overall success rate of 71% recommending stocks and a +26.7% average return per recommendation.

WatchOS 2.0:

Apple wasted no time working on an update for the Apple Watch, which has not yet become widely available because pre-orders sold out. In WatchOS 2.0, developers will have more freedom to create native apps that do not rely on the iPhone since new apps will have access to the Apple Watch’s microphone, speakers, and accelerometer. Users will have more options to personalize the Watch by choosing a background image and what default information will be displayed on the Watch. In addition, the Watch will turn to Nightstand mode automatically when it is on its side and charging. The WatchOS 2.0 is already available for developers and will be made available to the public in the fall.

Following the announcement, Bank of America analyst Wamsi Mohan reiterated a Buy rating on Apple with a $145 price target. Mohan applauded Apple for quickly introducing an update to the Apple Watch. The analyst noted, “this is a positive development given a better user experience is key to driving increased watch adoption.”

Wamsi Mohan has rated Apple eight times since October 2014, earning a 75% success rate recommending the stock and a +10.9% average return per AAPL rating. Overall, Mohan has a 59% success rate recommending stocks with a +10.1% average return per recommendation.

Although these new updates and features will rectify Apple’s existing ecosystem, many analysts were disappointed by the lack of new concepts because the majority of announcements were improvements on existing features. However, this sentiment did not impede the overwhelming bullishness expressed by analysts following the WWDC. Out of the 27 top analysts polled by TipRanks, the top analyst consensus for Apple is Moderate Buy. The average 12-month price target is $150.95; a 17% potential upside from where the stock is currently trading.

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