Mark Your Calendar: Apple’s (AAPL) Big Event Is Next Week — How the Stock Will React?
By Gene Munster
Apple (AAPL) begins its annual developer conference on Monday. We think that most of the headlines around the announcements are widely known, so we’re preemptively shifting from “preview” mode to “take away” mode. History suggests investor disappointment will follow the event given the likely absence of any material hardware product announcements. This reaction misses the point of WWDC: give developers the tools to build world-class software and services. By that measure, we believe this year’s WWDC will be a success.
We expect next week to be about giving more control to users and developers, continuing a steady shift from Apple’s traditional approach of tightly controlling the experience. These updates will increase retention, expand Apple’s 1.4B active device base, and give developers more opportunities to make money on Apple’s platform, a driver of Services growth.
The Innovation Question
Some may view Monday’s event as an indictment that Apple is struggling with innovation. The only new hardware to be highlighted would be an already-announced but not-yet-shipped Mac Pro, which accounts for less than 1% of revenue. The lack of hardware updates at WWDC is to be expected, given the company rarely announces new hardware at the event. Last year’s conference headliner was the new privacy and screen time managing features in iOS. We believe the better measure of innovation is to consider Apple’s announcements over a 2-year period. With that perspective, the company has more recently innovated around services (March announcement of Apple TV+, Apple Card, and Arcade) and next year (fall of 2020) Apple will likely announce a 5G iPhone. While 5G is not unique to Apple, what Apple does with 5G technology will be innovative, including advancing AR, healthcare, and autonomous vehicles.
Notable Announcements at This Year’s WWDC
- Marzipan, making it easier for developers to build once and deploy across multiple macOS and iOS. The code-named “Marzipan” tool makes it easier to port iOS apps onto the Mac, which allows developers to sell on iOS and Mac App Stores without reconfiguring their apps. It looks like Apple has been working on new Music, Books, TV, and Podcasts apps for macOS that will replace iTunes, likely Marzipan apps themselves. Important for Apple to eat what it cooks, as they’ve already done with the macOS Stocks app.
- Apple Watch-based App Store. This is important for two reasons: First, the use cases for the Watch have long been debated, due in part to consumers not being aware of the available watchOS apps. We believe an App Store on the Watch will increase consumer awareness. Second, increased awareness will drive developers to create more and better Watch-based apps and the Watch should become more useful over time. This should have the small effect of increasing demand for Apple Watch, which now accounts for about 5% of Apple’s revenue.
- New iMessage with WhatsApp-like profiles including photos. Apple currently offers iMessage plug-ins, but a more robust iMessage profile lays the groundwork for more advanced third-party in-message apps.
Other Possible Announcements
- iOS 13 with dark mode (likely)
- New home screen (very vague rumors)
- Core app updates (likely – Mail, Messages, Health, Home, Reminders, and a unified Find My app for iPhone)
- Better multitasking and mouse support for iPad (likely)
- Using iPad as a second monitor for your Mac (likely)
- New Mac Pro and 6k pro display (possible)
What We Would Like to See
To make Siri more useful, Apple has been slowly adding domains and expanding the number of tasks that a user can perform with their voice. Here is Apple’s current list of Siri domains. While it is not expected to be announced, we would like to see more domains added, and an altogether more aggressive push to make Siri more effective. Apple opened Siri up to third-party developers in 2016, but not nearly to the extent of Alexa and Google Assistant, which have outpaced Siri in terms of utility. Our latest test of digital assistants shows that Siri is playing catch up in areas like commerce and information.
Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio.