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After Visiting 6 Apple Hackathons And 500 iOS Devs, These Analysts Finally Have A 'Comprehensive' View Of The Apple Watch

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In a report published Monday, Global Equities Research analyst Trip Chowdhry maintained a Buy rating on Apple Inc. (NASDAQ: AAPL), with a price target of $165.

The analyst wrote that this was a comprehensive view on Apple Watch, after having attended Six Apple Watch-Kit hackathons over the past few months and speaking to ~500 Apple iOS Developers.

In the report, Global Equities Research noted, "By April 10th, Apple may have about 100,000 Apple Watch applications on AppStore. The $350 price of Apple Watch appears to be a non-issue. On an average an Apple Watch user will have 100 Apps installed, and one way to think about it is that the consumer is getting 100 devices for $350 ..i.e. $3.50 per device."

The analyst cited the company's "Winning Recipe" as "MORE DEVELOPERS = MORE APPLICATIONS = MORE DEVICES SOLD."

Chowdhry pointed out that Apple investors were worried about further dividend hikes. This is because a "dividend payout forces a tax liability on each shareholder" with the investors being "double taxed."

Moreover, following a dividend payout, the company's share price tends to decline. "Apple investors have indicated a preference for Share Buy-Backs," the analyst said, while explaining that "share buy-backs do not cause tax liabilities on investors" and that they "should not be funded by raising domestic debt," since the US dollar is getting stronger.

"Share Buy-Backs should be funded using Domestic Cash on Apple's Balance Sheet," Chowdhry said.

"Apple Watch has its own SDK (Software Development Kit) and its own AppStore and a new invented programming language called "Swift", which makes writing Applications on WatchKit fast and easy," Chowdhry wrote.

He explained why Apple Watch is likely to win, while Google Wear failed saying, "Apple WatchKit is extremely well engineered, and the framework is strictly sandboxed, which dramatically reduces developer errors, that could drain battery life. Android framework is very open and lose and hence prone to numerous developer errors.

"Apple WatchKit App can transparently access the Web via Watchkit Extensions that is running on iPhone. Android Wear requires a complex manual implementation of a proxy service that would connect through the bluetooth. Every aspect of Apple Watch is extremely well thought-off and seamlessly integrated - right from Software development tools, to AppStore, to the Design of the Apple Watch itself. Google Android Wear seems quite disconnected and haphazard in implementation."

The analyst cited Apple Watch's formula for success as "Banking on the user behavioral shift," while explaining, "A typical user takes their iPhone out of their pocket, glances at some App on the iPhone, and then puts the iPhone back into their pocket.

"An average user does this 110 times a day…Apple Watch offers convenience that obviates the need for the user to take out their iPhone, Glance at the App and then put the iPhone back in their pocket."

Latest Ratings for AAPL

DateFirmActionFromTo
Oct 2016Goldman SachsMaintainsBuy
Oct 2016Credit SuisseMaintainsOutperform
Oct 2016PiperJaffrayMaintainsOverweight

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Posted-In: Global Equities ResearchAnalyst Color Analyst Ratings

 

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