Excerpts from the notes I’ve seen. More as they come in, new ones on top.
Katy Huberty, Morgan Stanley: Mac Goes Vertical. The shift towards Apple silicon for the Mac was the most significant WWDC announcement and highlights how Apple continues to differentiate itself through vertical integration. Apple sets itself apart from technology hardware peers by developing everything from components to hardware, software, and services, which allows Apple to more tightly integrate world class technologies into products that deliver superior performance and a premium user experience. While the virtual nature of WWDC 2020 meant less focus on 3rd party apps that will take advantage of new OS and hardware features, Apple’s announced plans to leverage Apple silicon for future Macs further converges the user experience across devices. The tighter ecosystem combined with upcoming product launches, including 5G iPhones, suggests Apple’s 1 billion active user base will continue to grow. Overweight. $340.
Tony Arcuri, UBS: Vertical strategy pushing into Mac, as expected. Apple announced it will transition its Mac product line from INTC processors to its own ARM design through 2022 – a continuation of its strategy of vertical integration following years of convergence in its mobile and MacOS. Besides improvements to AirPods, most of the announcements were software-related innovations and aimed at using integration to drive even more stickiness of the ecosystem. Buy. Target to $400 from $325.
Toni Sacconaghi, Bernstein: From TheFly… Bernstein analyst Toni Sacconaghi raised the firm’s price target on Apple to $370 from $285 and keeps a Market Perform rating on the shares. As anticipated, Apple’s biggest update at the WWDC was that it would transition its Macs from Intel x86 to ARM-based chips, Sacconaghi tells investors in a research note. The analyst, however, continues to view the processor transition as largely immaterial to Apple’s financials. Apple provided virtually no updated operational or financial metrics and had little to say about the progress of Apple TV+, adds Sacconaghi. The analyst raised the firm’s target to bring Apple in line with “highly uncertain” fiscal 2021 market multiples of 20 to 25 times. Market Perform. Raises target to $370 from $285.
Wamsi Mohan, Merrill Lynch: Using technology in imaginative new ways. Perhaps the biggest takeaway from today’s event was the reassurance that Apple is still driving innovation and new ways to use technology hardware and software. Whether that is through AirPods incorporating surround sound and spatial audio, the Watch supporting more health workouts, tracking user dance movements and tracking sleep. Privacy remained a prime topic and key focus area. Buy. $390.
Andrew Uerkwitz, Oppenheimer. WWDC 2020 Highlights More Integrated Apple Ecosystem. iOS 14 will have easier to navigate Home Screen, data rich Widget, picture-in-picture, redesigned Siri interface, and more useful Message functions. iPad OS 14 will see more PC-like interface with a new sidebar for many apps, a less intrusive Search, and stronger support for Apple Pencil. AirPods will automatically switch between user devices based on context and AirPods Pro will have spatial audio. WatchOS will receive more customizable complications and newly added sleep tracking. The bigger updates to Mac mostly correspond to new features in iOS 14—the divide between iPhone/iPad and Mac are dissolving even further. Finally, Apple officially announced its plan to transition its Mac products from Intel to its own processors in two years. The historic move validates our view that Apple is creating a wide moat for its own ecosystem by deeper integration of hardware and software, and broader integration across all of its hardware devices. Outperform. $320.
Aaron Rakers, Wells Fargo: From Seeking Alpha… Rakers calls the event a “historic day” that showed “Apple’s software depth/breadth and ecosystem expansion is as competitively strong as ever.” Target to $400 from $385.
Jim Suva, Citi: From The Fly… The analyst believes the core reason for this change [from Intel] is so Apple “can better optimize its hardware and software roadmap for a more optimal consumer experience across multiple devices as well as not having to rely on external suppliers as much.” Suva estimates the incremental savings to Apple will be approximately $25-$50 per Mac. Based on approximately 17M Mac PC units sold per year, this would equate to pretax savings of $425M-$850M, or 8c-16c in earnings per share, says Suva. Buy. $400.
William Power, Baird: From TheFly: Baird analyst William Power raised the firm’s price target on Apple to $390 from $320 and kept an Outperform rating on the shares. The analyst noted the company’s annual developer’s conference was held Monday, and the company introduced numerous software enhancements, including new technology for using the iPhone as a car key and a sleep mode for the Apple Watch. Outperform. Target to $390 from $320.
Jeff Kvaal, Nomura: Hold. (new Street-low) $250.
Ananda Baruah, Loop Capital: From TheFly… The analyst says the announcements by the company at WWDC were “evolutionary” and “appealing”, with updates to the device user experience and confirmation of the long-rumored switch to Apple-designed silicon for the Mac that will begin shipping by year end. Baruah adds that Apple’s 5G iPhone event in the fall will now potentially include numerous updates to devices, though in the near term, investors remain focused on the growth in services, AirPods, and other ancillary devices. Hold. Target to $330 from $280.
Rod Hall, Goldman Sachs: Apple Silicon transition confirmed, no iPad multi-tasking update, iOS home screen overhaul and more. On the negative side, Apple did not announce an update to iPadOS multi-tasking that we believe would have made that platform more viable as a laptop replacement and potentially opened up the lower end laptop market to Apple… We continue to see Apple as maintaining its substantial product quality advantage necessary for keeping it valuable user base onboard. However, as we continue further into the COVID-related recession we believe that Apple’s expensive products are likely to see substantially weaker demand than consensus expects with our CY2021 EPS forecast currently 14% below FactSet consensus. Sell. Price target to $263 from (Street-low) $243.
Matthew Cabral, Credit Suisse: Privacy remains a key focus as use case converges across platforms. Unifying themes that stood out include: (1) a steadfast commitment to privacy; (2) the advantages in owning an integrated HW/SW (and increasingly Services) stack in the push toward increased customization and AI/ML; and (3) converging the use case across platforms (primarily iPad/Mac). All-in, today’s launches were more incremental vs. thesis-changing; the fundamental focus remains more centered on the coming iPhone 5G launch this fall (we’re more cautious near-term vs. a tough macro) and continued Services momentum, particularly on App Store. Neutral. $295.
Samik Chatterjee, J.P. Morgan: WWDC Innovation Focuses on Improving User-Experience; Highlights Attractiveness of Ecosystem. We “attended” Apple’s Virtual Special Event Keynote for Worldwide Developer Conference (WWDC) where the focus was on new features and capabilities that target to improve user-experience across the entire breadth of the portfolio, serving to increase the stickiness of the current installed base as well as highlight the attractiveness of the Apple ecosystem relative to other OEMs. Additionally, as highlighted in press reports heading into WWDC (see here), Apple announced plans to transition the Mac from Intel to in-house silicon design, which, while too early to quantify, is likely drive performance and cost advantages as well as harmonize the underlying silicon across the product portfolio. Overweight. $365.
Amit Daryanani, Evercore ISI: “TOP SIX” WWDC Keynote Takeaways – Making the Ecosystem Stickier & Efficient. 1) iOS14 was announced with upgrades focused on enhancing the overall iOS experience, improvements to messages focused on group messaging functionality, and upgrades to Siri and Maps. 2) Apple announced enhancements to Car Play and debuted a new NFC-based app that will enable keyless vehicles entry (launches in BMW 5-Series next month). 3) Airpods got some major upgrades enabling automatic handoffs between devices and spatial audio to enable immersive surround sound. 4) WatchOS 7 was announced with sleep tracking and a rebranded fitness app. 5) TV+ is getting a new show called Foundation that will be released in 2021. And 6) Mac is transitioning to Apple’s in-house silicon. Net/net: There was no major “one more thing” at the event, but in aggregate the announcements do make the ecosystem more robust and the shift to in-house silicon is a positive for margins. Outperform. $375.
Daniel Ives, Wedbush: Initial WWDC Thoughts; More Control of the iOS Ecosystem With Own Chips. Taking a step back, this will be a drumroll ahead of a major hardware release schedule ahead across the Cupertino product portfolio with iPhone 12 the main event and growth catalyst for the Street. As part of the keynote the “star of the show” was Apple officially announcing its ARM-based Macs as Cook & Co. takes more control around its chips/architecture and crown jewels hardware ecosystem moving forward. This was a seminal event as the chip announcement is the first step of many more down the horizon in our opinion as Cupertino takes the reigns of its architecture and the cross pollination between software and hardware become ubiquitous going forward. Outperform. $375.
Gene Munster, Loup Ventures: Advancing What Only Apple Can Do. In what feels like a first for the headphones industry, Apple announced a free software upgrade for AirPods Pro that will bring two new value to customers: 1) AirPods Pro will now feature spatial audio, like surround sound for headphones. In order to deliver on spatial audio, Apple uses 3-dimensional data from the source device (iPhone, iPad, or Mac) and from the AirPods Pro (using gyroscopes in the AirPods). 2) Automatic switching between Apple devices is now coming to AirPods. Previously, AirPods were simple to pair with your Apple device and would appear on any device logged into the same Apple ID. But switching from, say, your iPhone to your Mac as the audio source was manual. Now, switching from device to device will be automatic, based on whichever device you’re using. Spatial audio and automatic switching are two great examples of features only Apple can deliver, and another reason that we think the AirPods story is just starting.
Ben Bajarin, Think.Tank: Apple Silicon Inside. [Johny Srouji SVP of Hardware Technologies] set the stage talking about how the high bar of the iPhone and the designs team ambitions demanded custom silicon. It is this phrase “demanded custom silicon” that stood out to me and hit home something I’ve tried to articulate many times before. What it means is Apple had the ambition to take the iPhone somewhere, and they could not find any vendor silicon to meet their needs. In this segment on their work developing custom silicon for iPhone, Srouji also made this statement, “this is where we developed our relentless pursuit of performance per watt.”
Nick Wingfield, The Information: In theory, the shift could mean more powerful Macs, with longer battery life and, perhaps, more software if running iPhone apps on Macs becomes a thing. The announcement of the shift could hurt the sales of Apple’s current Intel-based Macs. Still, since Macs now represent only about 9% of Apple’s revenue, that’s much less of an issue than it was before the iPhone came along.
Benedict Evans, Benedict’s Newsletter: In the 1990s Apple picked the wrong horse, going with PowerPC CPUs instead of Intel, and in 2005 it fixed that, switching the Mac to Intel and hence switching to the ecosystem that had scale and getting the cost and performance benefits of that. But today mobile is far bigger than PCs and iOS is far bigger than the Mac, so Apple is moving to scale again. And now Apple has a world-class chip team: the iPhone/iPad CPUs are significantly ahead of the competition.
John Gruber, Daring Fireball: Interesting but not surprising that Apple (a) never one mentions “ARM” by name, and (b) hasn’t revealed the name of their custom Mac chips yet. They’re just saying “Apple Silicon” as a placeholder for a name to be unveiled when they begin unveiling actual consumer hardware.