The Street's Reaction To Apple's New Products: 'Meh On Phones But Wow, Streaming Is Really Cheap'

While Apple Inc. AAPL watchers zoned in Cupertino’s new iPhone and Apple TV+ unveil, reaction from analysts was a bit muted, though generally positive, with most saying the company did the expected with upgrades of existing products.

One excited exception was for the unexpectedly low price of streaming service Apple TV+, which CEO Tim Cook announced would be $4.99 a month, raising Street expectations on adoption.

The Analysts

Credit Suisse Analyst Matthew Cabral remains Neutral on Apple with a $209 price target.

Morgan Stanley’s Katy Huberty reiterated an Overweight rating and $247 price target on Apple.

Wells Fargo’s Aaron Rakers rates Apple at Market Perform with a $215 target price.

Bank of America analyst Wamsi Mohan reiterated a Buy rating on Apple and raised the price target from $240 to $250.

Wedbush analyst Daniel Ives kept an Outperform rating on the stock with a $245 price target.

KeyBanc’s Andy Hargreaves kept his Sector Weight rating on Apple.

iPhone 11

The company’s signature product is what Apple watchers came to see but sell-side analysts were pretty blasé on the new iPhone 11s. There was some praise for pricing — the lower-end iPhone is $50 cheaper than last year.

But while Apple excitedly showed off new camera functions, including a three-camera design on higher end models, few were knocked off their seats.

“The updates were largely in-line with expectations,” Cabral wrote in a note.

And from Hargreaves: “Apple's new iPhones … seem unlikely to drive a material increase in unit volume.”

Huberty liked the improved photo quality and battery life touted by Apple, with four to five hour longer battery life for the lower end phone.

“Survey results show camera quality and battery life are two of the top three features consumers consider when upgrading their smartphone,” Huberty wrote.

Rakers said the most interesting difference may be a marketing change as Apple presents higher end phones as premium “Pro” products, and the basic phone as the norm, rather than positioning the cheaper phone as a discount version.

“This change in messaging makes sense as there were comparatively few major changes to the iPhone lineup outside of the camera and processor upgrades,” Rakers wrote.

Loup Ventures’ Gene Munster and Will Thompson said the new phone features should boost lagging sales a little.

“We continue to feel confident that iPhone revenue will be flat to up slightly over the next year after being down 15% in the last three quarters,” the pair wrote in a blog post.

Apple TV+

Surprisingly low $4.99-a-month pricing for Apple’s streaming service got sell-siders more excited. Several said it makes for likely high adoption quickly after its November launch.

Ives said the Street was expecting a price range of $8 to $10 a month.

“Clearly Cupertino is looking for market share coming out of the gates with these surprising price points that we loudly applaud,” Ives wrote. “With an installed base of 900 million active iPhones worldwide we believe Cook & Co. have an opportunity to gain 100 million consumers on the streaming front in the next 3-4 years.”

Apple Arcade

Mohan said the gaming service price was also notable.

“Pricing … was even more compelling for Arcade (cost of one console game for access to 100 games for the entire family for a year),” Mohan wrote.

Apple Watch

Analysts also liked functionality improvements for Apple Watch, though the product gets less attention than Apple's widely familiar phones.

Mohan said new health and fitness functions should make the watch a holiday season hit.

Loup Ventures cited a move to keep the screen always on. When people look at a watch, they want to be able to immediately see the clock.

“Apple Watch Series 5 seems to be all grown up and brings the digital watch on par with traditional watches in a critical use case — telling the time,” Munster and Thompson wrote.

Price Action

Apple shares were up 1.9% at publication time to $220.83.

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