Excerpts from the analysts’ notes I’ve seen. More as they come in, newest on top.
Gene Munster, Loup Ventures: Raising Apple Watch Unit Growth In FY18 To 59% From 9%. With the introduction of LTE to the Apple Watch Series 3, as well as reduced price of the Series 1, we have become meaningfully more bullish on demand for these products. Near term, we have increased our unit assumption from 3.5M to 5.1M, implying 60% y/y growth. Looking longer term, we believe this announcement will add ~10M incremental Apple Watch units in 2018, implying Apple Watch sales grow 59% y/y to 26M in FY18. Due to the reduced price of the Series 1 we have lowered our Apple Watch ASP to imply flat y/y growth in FY18, but due to the higher expected sales we are now modeling the company to record $11.7B (4% of sales) Apple Watch sales in 2018.
Stephen Turner, Hilliard Lyons: Apple Product Launch Highlights. We believe the average consumer may find the facial scanning technology disturbing, an issue Google has dealt with on numerous occasions. We also note Face ID failed during the presentation. The new phone lineup will include a retro glass back and include wireless charging, new camera array, and run the new iOS 11 operating system. Apple updated its CPU to the A11 Bionic chip, a 6 core CPU and included an Apple designed GPU that is 30% faster, designed for running Metal 2, machine learning processes, and augmented reality apps. Augmented reality features were showcased with animojis and new game play which we expect to become a significant boost to Apple’s services revenue and potentially lead to new hardware devices. Long Term Buy. Raise price target to $182 from $180.
Carolina Milanese, Creative Strategies: iPhone X rests on the Shoulders of the iPhones that came Before It. The two key features that will drive iPhone X interest are FaceID and the new Super Retina Display. While users will have to learn new gestures to navigate the new bezeless screen, the learning curve does not seem steep. The screen is beautiful and drives instant gratification while the real benefit of FaceID will come with use. As always with Apple, it is not about a feature performing one task, it is about leveraging that feature in different ways. So FaceID unlocks your iPhone X, but the technology behind it also opens your notifications or turns off your alarm if the iPhone “sees” you looking at the screen. And of course, face recognition is also empowering the new Animojis, which will push messaging to an all new level! All these experiences point to Apple creating an even tighter connection between me, the user, and my iPhone, one where thanks to ML and AI things will happen just like magic.
Tim Bajarin, Creative Strategies: Apple Watch Series 3: Observations. With the inclusion of an LTE modem, the Apple Watch, which is now the #1 smartwatch on the market regarding units and revenue, Apple takes their wearable up a big notch and makes it even smarter in its right. It has a new dual core CPU that is 70% faster than the last series and Apple delivers an ingenious way to use the screen itself for the radio’s antenna, making it one of the most innovative smart watches on the market bar none.
Ben Thompson, Stratechery: Lessons and Questions. What is and remains so brilliant about the iPhone specifically and Apple’s business broadly is how everything is aligned around Apple being the Apple Jobs envisioned: a company that shows its “appreciation to the rest of humanity [by making] something wonderful and put[ting] it out there.” By making the best products Apple earns loyal customers willing to pay a premium; loyal customers give Apple both freedom to make large scale changes and also a point of leverage against partners like carriers and developers. And then, the resultant profits lets Apple buy the small companies and do the R&D to create the next set of products.
Neil Cybart, Above Avalon: Apple Product Pricing Shock. In what came as a complete shock, Apple increased 4.7-inch and 5.5-inch LCD iPhone pricing by $50. No one saw that coming. My expectation was for Apple to actually cut prices for those models by $50 to $70. Meanwhile, Apple decided to continue selling the two-year old iPhone 6s and 6s Plus, along with one-year old iPhone 7 and 7 Plus. Apple is once again selling three years worth of iPhones. You would have to go back to 2013 for the last time this happened when Apple offered the iPhone 4, 4s, and 5.
Andrew Uerkwitz, Oppenheimer: 3D sensing/Face ID. The new authentication method paves the way for Apple to implement and encourage more AR applications on iOS. Although smartphones are not the perfect device for AR, we believe iPhones provide the ideal testing ground for developers to trial and error for future generations of head-mounted AR devices. Bottom line: The amount of leaks in recent months substantially reduced the excitement over Apple’s newly announced products. While Apple proves again that it stands on the bleeding edge of mobile processor design, smartphone AR, and image capturing, we believe new iPhones are unlikely to fundamentally change the current competitive dynamics of the smartphone market. Perform. Price target NA. (Last published Oppenheimer price target was $120 on 1/11/16.)
Tavis McCourt, Raymond James: Largely as Expected. Apple Watch upgrades were as anticipated, while Apple TV remains a rounding error financially. Overall, our initial perspective is that the 8/8 Plus probably do better than we would have thought and X a bit worse relative to our expectations heading into yesterday’s event, with the bias clearly higher in terms of gross margins and ASPs. The wild card is clearly whether any third part augmented reality apps become wildly popular, providing a potential impetus for increased switching of high end users from Android. Outperform, $170.
Yoel Minkoff, SA News: Apple suppliers’ shares fall across Asia. Shares in Apple’s suppliers slumped overnight after the new iPhone X disappointed with a later than expected shipping date, on Nov. 3. The $999 price tag could also dent demand for the device in some markets. Across Asia: Zhejiang Crystal-Optech -6.7%, Shenzhen Desay Battery Tech -4.4%, AMS -4.1%, Catcher -5%, Largan -3.8%, Goertek -3.6%, Wistron -3.4%, Shenzhen O-film Tech -3.4%, Pegatron -3.1%, LG Innotek -1.8%, Hon Hai -1.3%, Zhejiang Tony Electronic -1.1%, Han’s Laser -1.1%, TSMC -0.5%.
Mark Hibben, Rethink Technology: Apple’s Breakthrough 3D Sensor Technology. I’ve never seen the company introduce so much new tech in one event before: the 3D sensor for iPhone X, LTE connectivity in Apple Watch Series 3 (without changing the form factor), and a new A11 Bionic processor with a special Neural Engine for machine learning… Although many complain that Apple just adopts other companies’ technology, it showed with the September 12 event that it could genuinely lead in technology development. Investors shouldn’t let themselves become distracted by whimsical Animojis. No other smartphone in the world has the TrueDepth sensor. Apple is bringing its very substantial resources to bear to solve real problems and gain technological advantage. Buy.
Tim Long, BMO: A perfect X? There were few surprises, though we did like the new phone’s design and the pricing adjustments. While we were disappointed by the later-than-expected ship date for the iPhone X (pronounced “ten”), we still believe the refreshed iPhone portfolio will do well thanks to improved features and a growing installed base. Our FY17/FY18 EPS estimates go to $8.95/$11.03 from $9.01/$10.90. Outperform. $180.
Karl Ackerman, Cowan: iPhone Build Update. Our in-depth analysis on DecQ suggests ~91MM iPhone units, primarily driven by the huge ramp up of OLED units that accounts for >50% of overall units in DecQ. This is largely consistent with the ramp we have opined about year-to-date – suggesting the OLED version is merely pushed from CQ3 into CQ4 – and underscores a very robust iPhone shipment outlook for late CQ4/early CQ1 (CQ4 builds +15% Y/Y).
Amit Daryanani, RBC: iPhoneapalooza. This year’s event marked one of the most highly anticipated product announcements in recent years, and from a product perspective, the company did not disappoint. We think the new form factor and net new features/capabilities (wireless charging, AR enablement, 3-D sensing) added to the flagship device will drive accelerated device upgrades within AAPL’s install base combined with increased switching activity. Notably, the iPhone X will not begin shipping until November 3; the later than anticipated launch date could partially shift new device unit/ASP lift from Dec-qtr to Mar-qtr. Fundamentally, we think the excitement surrounding the new form factor/features will drive increased unit demand in addition to mix shift toward the higher-end device ($999), which should enable one of the strongest iPhone cycles in recent years.Outperform. $180.
Robert Cihra, Guggenheim: Don’t Sell the News. With shares up 39% YTD vs. the S&P500’s 11%, many investors now feel they should “sell the news” but we disagree and rather raise our price target to $200 from $190, as rising iPhone ASPs further accelerate revenue growth. We continue to see Apple now set up for its biggest iPhone cycle in 3 years, providing more runway for appreciation driven by our expectation for: 1) pent-up demand + 2) a MULTI-year OLED rollout + 3) double- digit increases in iPhone’s blended ASP. Buy. Raise price target to $200 from $190.
Abhey Lamba, Mizuho: Maintain Neutral on Limited Upside. None of the features in the version 8 product will likely accelerate demand. Rather we see a risk of demand push-out (wherever physically possible) to next year when Apple will likely release OLED versions more broadly. We expect the company to include new display technology and offer an updated design next year when OLED screens will be more broadly available. As such, mainstream iPhone users might consider pushing out their purchases to next year when they can get greater innovation at a lower price. The price points of iPhone X might create reasonable response in markets that offer subsidies but it is likely to experience limited adoption in markets where consumers have to pay full price upfront. Additionally, supply shortages initially will likely offer limited potential for upside. Neutral. $150.
Michael Olson, Piper Jaffray: New Device Upgrades Consistent w/ Expectations. This being the tenth anniversary of the original iPhone, expectations were for the company to deliver a device with a relatively more robust set of upgraded features; we believe Apple generally met these lofty expectations. Most notably, we would point to the change in form factor (edge-to-edge, glass OLED screen) and 3D sensing (enabling facial recognition) as the key upgrades. Overweight. $190.
Gene Munster, Loup Ventures: iPhone X Hints at a Post-Smartphone World. iPhone X will ship on November 3, roughly six weeks after we had previously expected. We estimate that some users (about 20% of all new iPhone buyers) will opt for the iPhone X over iPhone 8 and previous models. The ship date likely won’t have a material impact on the number of units sold, but will push some unit sales into the March quarter. Ultimately, roughly 10% of our previous iPhone unit sales in the December quarter will be iPhone X sales that are shifted into the March quarter.