4 Apple Analysts Pick Apart WWDC Highlights

Apple Inc. AAPL won Street experts over with the debut of dozens of small service tweaks Monday at the 2018 Worldwide Developers Conference.

“Today's software announcements only strengthen Apple's ecosystem, allowing for unique user experiences (such as AR functionality), enhancements to capabilities where Apple has been admittedly behind (such as AI integration) and unparalleled services (such as the App Store) that cannot be replicated, in totality, by any other hardware vendor,” Morgan Stanley analyst Katy Huberty said in a note.

The event ultimately reinforced Huberty’s confidence in Apple as the world’s most valuable tech platform.

The Standouts

Baird Equity Research zeroed in on Apple’s parental control upgrades, Watch improvements, FaceTime functionality, third-party apps on Mac and expanded partnerships. Bernstein praised ARKit, Apple Watch and Dolby Atmos updates as key to product differentiation.

Bank of America Merrill Lynch touted the value of operating system improvements.

“The OS enhancements announced at WWDC, including multiperson FaceTime, make Apple products more useful and enjoyable to use and should help drive increased loyalty and consequently long-term Services revenue growth,” said analyst Wamsi Mohan.

Morgan Stanley considered the augmented reality and Siri shortcut announcements most critical in bolstering Apple’s competitive position against Snap Inc SNAP in the personalized emoji space and Alphabet Inc Class A GOOGL GOOG and Amazon.com, Inc. AMZN in digital assistants.

“With full integration available on the iPhone, iPad, HomePod and Apple Watch, we believe this brings Siri one encouraging step closer to competing with the likes of Amazon's Alexa and Google's Assistant,” Huberty said. 

The Siri updates were insufficient for Bernstein.

“We believe that Apple continues to lag in artificial intelligence (AI), with Siri as a sticking point,” analyst Toni Sacconaghi Jr. said, noting that Siri’s per-user queries appear to have declined.

What Was Missing

Notably, Apple did not debut new hardware, nor did it reference the HomePod, Apple Music, AirPower, iPhone SE 2 or refreshes to the MacBook or iPad Pro.

“In some cases, what wasn't talked about at this year's WWDC was just as interesting as what was talked about,” Bernstein's Sacconaghi Jr. said. 

Many of the iOS changes “felt like catch-up to competitors" like Google, the analyst said. 

“In general, most of the updates at WWDC felt largely evolutionary rather than revolutionary."

Community Growth

The growth of the registered developer community, from 16 million in 2017 to 20 million this year, testifies to the Apple platform’s strength, according to Bank of America Merrill Lynch. 

At the same time, Morgan Stanley interpreted the $100-billion developer payment milestone to mean App Store revenue is set to outperform estimates.

The Ratings

• Bank of America maintained a Buy rating with a $225 price target.
• Baird maintained an Outperform rating with a $200 price target.
• Bernstein maintained a Market-Perform rating with a $190 price target.
• Morgan Stanley maintained an Overweight rating with a $214 price target.

Related Links:

Macquarie: Apple's WWDC Was 'Relatively Low-Key'

Gene Munster: Apple's June 4 WWDC 'Vastly More Important' Than September Announcements

Photo courtesy of Apple.