Why Apple's Presentation Fell Flat

by Jayson Derrick

September 10, 2015 2:45 PM | 3 min read | Make a Comment

Shares of Apple were higher by two percent Thursday morning.
Apple's Wednesday presentation fell "flatter than the new iPad," according to Pacific Crest.
Jefferies says Apple is in a ‘transition' phase, Pacific Crest Says

Shares of

Apple Inc.AAPLtraded lower following its much anticipated presentation and introduction of new products and services but were higher by around two percent Thursday. While many consumers and Apple enthusiasts are excited to acquire the latest products, two analysts have come out with not so flattering reviews of the presentation and new products and services. Jefferies: Apple In ‘Transition' Sundeep Bajikar of Jefferies commented in a note that Apple's event was "largely in line" with his expectations, with both positives and negatives. Bajikar continued that the smartphone market is "maturing," Android's capabilities are "just as good if not better" than Apple's iOS, and competition from China is "intensifying." Meanwhile, Google Inc GOOG GOOGL is "extending its lead" in Cloud Services and advancing its technologies for a future self-driving car. Bajikar further noted that Apple needs to introduce new categories of products and services, particularly in China, to extend its brand advantage. The analyst suggested that Apple may be in the "early stages of transition" of doing so with the Watch, Apple Pay, and iPad Pro. Finally, Bajikar pointed out that as "inflated" iPhone expectations shift lower, Apple's stock could become "incrementally more attractive," especially when further factoring in an improved fiscal 2016 earnings per share estimate (increased to $9.71 from a previous $9.58) due to the higher effect of share repurchases at a lower stock price. Shares remain Hold rated with a price target lowered to $126 from a previous $130. Pacific Crest: Apple Event ‘Lacked Focus' Andy Hargreaves of Pacific Crest commented in a note that Apple's event "lacked focus" while the presentation fell "flatter than the new iPad" as the company's new products and services were "largely in line" with his expectations. Hargreaves noted that his view of the iPhone 6s remains unchanged and is unlikely to drive the upgrade rates and share gains seen in the iPhone 6 cycle. In addition, the phone's new features (3D touch, 4k video streaming, etc) are only "relatively modest" improvements. However, in typical Apple fashion, the features "seem to be enough" to compel a "normal" level of upgrades, which is key to the analyst's long-term view around iPhone's pricing power and cash generation ability. Switching over to the Apple TV, Hargreaves argued that the improved box provides some "interesting" and new-to-Apple functionality, the presentation "almost completely missed the mark." The analyst added that consumers have "very little" interest in shopping, looking at the weather, and other tasks that are popular on smartphones on a TV. "The presentation's focus on mobile-like apps suggested that Apple either does not share our view, which would raise questions about its longer-term potential in the TV market, or that it made a tactical mistake in the demonstration," Hargreaves wrote. "We continue to believe Apple has the opportunity to disrupt the traditional pay-TV market with a virtual MVPD service, but yesterday's demonstration and other launches in the software/services group in recent years have not improved our confidence." Finally, the analyst stated that the iPad Pro "looks good" and the "lengthy" presentation showcased functionality that will appear to business users. Despite that, the device "does not appear to be an incremental purchase" and could cannibalize sales of current iPads on the low end and MacBooks on the high end. As such, a gross-profit benefit is unlikely to be noticeable at Apple's scale. Bottom line, Apple's stock is already factoring in iPhone unit sales to be down in the early part of the 6S cycle and upside to the stock exists if demand proves to be "more sustainable" than previously though.

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Posted In: Analyst Color Analyst Ratings Apple Apple TV iPad iPad Pro iPhone 6S Jefferies Pacific Crest

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