iPhone 6 & Apple Watch reveals lived up to the hype for Wall Street, investors have high hopes for A

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in AAPL Investors edited September 2014
With the redesigned iPhone 6 expected to set new sales records this holiday season, the impending launch of the Apple Pay mobile wallet service expected to catch on with consumers, and next year's debut of the Apple Watch, analysts on Wall Street were largely satisfied with Apple's announcements this week.




Though the company didn't deliver any major surprises from its media event, the company did manage to meet lofty expectations and has earned positive buzz among investors. Here, AppleInsider offers a roundup of analyst reactions to the Apple Watch, iPhone 6, and Apple Pay.

Morgan Stanley

Like many others on Wall Street, analyst Katy Huberty has high hopes for the newly announced Apple Pay transaction system tied to the iPhone 6 and Apple Watch. She believes that Apple Pay will accelerate the trajectory of growth and profitability of the company's online services.

Apple announced on Tuesday that major U.S. banks have partnered, accounting for 83 percent of U.S. transactions. Several retailers are also onboard, including Macy's, Bloomingdale's, CVS, McDonald's, Whole Foods, Groupon, Target, and OpenTable.

As for the new iPhone 6, Huberty sees Apple making huge market share gains with larger screen sizes. Her current estimates call for iPhone sales to grow 11 percent in calendar year 2015, a figure she admits is "conservative," especially with her research suggesting supply chain partners are planning to increase production more than 20 percent.




Huberty also sees the potential for higher average selling prices with the iPhone 6, particularly because of increased functionality with the 5.5-inch iPhone 6 Plus, which carries a $100 premium. The jumbo-sized iPhone model allows for more iPad-like functions, including landscape view, and it also boasts exclusive optical image stabilization capabilities for the rear camera.

In addition, Apple may also prompt users to upgrade to higher capacities thanks to a new structure. While the base models of the iPhone 6 and iPhone 6 Plus still start with 16 gigabytes of storage, $100 more quadruples the capacity to 64 gigabytes, while another $100 on that will net customers a whopping 128 gigabytes of storage.

As for the Apple Watch, Huberty said Apple's approach balances both fashion and features, focusing on customization to potentially reach a wide audience. She expects to see higher-than-consensus demand for the Apple Watch when it debuts in early 2015, with sales north of 30 million units in the first year.

Wells Fargo Securities

Apple delivered on expectations at Tuesday's event, in the eyes of analyst Maynard Um. Most of what the company revealed had been rumored ahead of time, including two different screen sizes for the iPhone 6, a wearable Apple Watch coming in early 2015, and the new NFC-based payment system.

To Um, the Apple Pay system is the most interesting announcement made by the company. He believes the new service will generate revenue for Apple through fees, though he said the initial opportunity will be small, especially given that Apple Pay will initially only be available in the U.S.

He expects the iPhone 6 will see a strong launch when it debuts on Sept. 19. Apple is planning its fastest-ever rollout of the latest handset, launching in 115 countries by the end of the year. That compares to just 49 countries by the end of November for the iPhone 5s in 2013.

"Services such as mobile payments will likely keep and potentially attract people to the ecosystem," he said.


J.P. Morgan

The Apple Pay system is not only more comprehensive than analyst Tien-tsin Huang expected, but also is more collaborative with existing payment providers than it is disruptive. Specifically, he didn't expect the inclusion of debit cards in the Apple Pay system.

"Thematically, Apple Pay is a much needed positive catalyst for mobile payments adoption and a win for collaboration between technology and regulated payment leaders/incumbents to put out a simple, secure solution, understanding the degree of difficulty to do so is high," he wrote.

While he expects the system to work out well for Apple and the wireless payment industry in general, Huang sees the Apple Pay announcement as a negative for eBay, which owns PayPal.

"We think the ability to pay quickly using the device's Touch ID potentially removes a significant friction point to offline mobile payments, which could help Apple significantly challenge PayPal's nascent offline POS solution," he said.

Piper Jaffray

Analyst Gene Munster believes that Apple Pay will prove to be the company's most important Internet service since the debut of iTunes. Like others, he said the payment system is more built out than he expected, which bodes well for future adoption when it launches in October.

"In the near-term, we believe the more obvious impact of Apple Pay is to drive incremental hardware sales in the iPhone 6," he wrote. "Longer-term, we believe that Apple intends to find specific ways to monetize each payment transaction on platform, which could be achieved through various efficiencies in the system. We expect investors to view Apple Pay as a reason why shares of AAPL could trade at a higher multiple given it represents the beginning of a potentially significant new bottom line driver for the business."

While Apple isn't focused on monetizing Apple Pay immediately, Munster believes that over time the company will engage more actively in monetizing the platform directly. For now, he sees Apple gaining ground with consumers by reducing fraud and moving online transactions to "card present," which would result in a lower rate with credit card companies.


RBC Capital Markets

"Reality did meet the hype," analyst Amit Daryanani declared after Apple's announcements. He expects the company's new iPhone 6 lineup will ensure one of the strongest iPhone cycles yet, and potentially the most profitable one as well with average selling prices gravitating higher.

Daryanani also came away impressed with the Apple Watch, praising its capabilities and saying he believes it will be a growth driver for the company in calendar 2015.

As for Apple Pay, he believes Apple can generate lower processing fees because of negotiations with major retail partners. He believes consumers will embrace Apple Pay because of ease of use with Touch ID, secure payment with encryption, and Apple's strong reputation when it comes to user privacy.

Cowen and Company

To analyst Timothy Arcuri, Apple Pay represents Apple "at its best:" the company is leveraging its massive iTunes user base to partner with a number of financial institutions and vendors to improve customer experience. The end result, he believes, is that Apple will sell more hardware and tie users into its ecosystem.

To him, this stands in contrast to Google's Android platform, which he believes Apple Pay will "exploit" to gain market share for the iPhone 6. Specifically, he believes Android will continue to "struggle with vital security requirements of a payments mechanism."

Arcuri also noted that the iPhone 6 Plus is the first time Apple is upselling customers to the high end, with a higher starting price of $299 for the entry-level 16-gigabyte model. Like others, he sees the average selling price of iPhones increasing as a result, improving Apple's bottom line.
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Comments

  • Reply 1 of 107
    The [I]only[/I] disappointment for me was the 16GB storage being the base on the new iPhones. That just feels cheap. Even as a shareholder it feels cheap.

    That being said, they weren't kidding about the watch. Switzerland is in trouble, and Apple is playing in a completely different league than the likes of Samsung and the rest of the Droid Kidz. Some people claim the Moto 270 looks better, it's still a worthless device with obsolete hardware though.
  • Reply 2 of 107
    Quote:

    Originally Posted by TheWhiteFalcon View Post



    The only disappointment for me was the 16GB storage being the base on the new iPhones. That just feels cheap. Even as a shareholder it feels cheap.

     

    I look at it this way:

     

    The iPhone has gotten cheaper, since there is no longer any 32GB option, and for the same price as 32GB before, you now get 64GB!

     

    So if anybody feels that 16GB is too little for them, then you simply get the 64GB model! Problem solved!

  • Reply 3 of 107
    Originally Posted by Apple ][ View Post

    The iPhone has gotten cheaper, since there is no longer any 32GB option, and for the same price as 32GB before, you now get 64GB!




    There IS a 32GB option on the 5S, and it’s $149 instead of $199.

  • Reply 4 of 107
    Quote:
    Originally Posted by Apple ][ View Post

     

     

    I look at it this way:

     

    The iPhone has gotten cheaper, since there is no longer any 32GB option, and for the same price as 32GB before, you now get 64GB!

     

    So if anybody feels that 16GB is too little for them, then you simply get the 64GB model! Problem solved!




    I agree.

     

    In the UK, to buy the iPhone 5S unlocked/unsubsidised (before the announcement, it costs £549/629/709 (16GB/32GB/64GB).



    Now with the iPhone 6, I can get 16GB for £539. I would of payed £629 for 32GB of storage, now I pay £619 for 64GB of storage. And I would of payed £709 for 64GB of storage, whereas now it's £699 for 128GB of storage.

  • Reply 5 of 107
    I haven't seen a lot of attention given to Apple's nefarious strategy of making the new iPhones bigger and therefore a lot harder to get in and out of your pocket, necessitating a wrist-wearble proxy for the device, but I'm pretty sure this is no coincidence!
  • Reply 6 of 107
    wizard69wizard69 Posts: 12,282member
    The only disappointment for me was the 16GB storage being the base on the new iPhones. That just feels cheap. Even as a shareholder it feels cheap.
    it is cheap but likely exactly what many corporate customers ask for. Corporate IT can be amazingly stupid at times.
    That being said, they weren't kidding about the watch. Switzerland is in trouble, and Apple is playing in a completely different league than the likes of Samsung and the rest of the Droid Kidz. Some people claim the Moto 270 looks better, it's still a worthless device with obsolete hardware though.

    That is probably a question of tastes, right now I consider the Apple Watch to be the better looking of the two. The thing that many don't grasp here is that this is just Apples first entry into the market. A rev one device if you will. As a result it is really all improvements from here on out. The other thing people don't realize is that watch makers by definition are in the fashion industry, as such they need to deliver dramatically different products year after year while maintaining production of the meat and butter products.
  • Reply 7 of 107
    wizard69wizard69 Posts: 12,282member
    retrogusto wrote: »
    I haven't seen a lot of attention given to Apple's nefarious strategy of making the new iPhones bigger and therefore a lot harder to get in and out of your pocket, necessitating a wrist-wearble proxy for the device, but I'm pretty sure this is no coincidence!

    One of the reasons I kept my iPhone 4 for so long is that I'm not happy with the idea of filling my pocket with a huge cell phone. If I want a big screen I grab for my iPad. In the end I really believe the market for the so called phablets is already cooling off. Let's face it Samasungs sales aren't all the great outside of certain parts of Asia.
  • Reply 8 of 107
    What piqued my interest is that the [I] new[/I] product and service announced yesterday: ?Pay and ?Watch -- have abandoned the [I] i [/I] prefix used for iPod, iTunes, iPhone, iPad ...

    I suspect that this signifies a new era where Apple intends to make their products as ubiquitous as [I] Kleenex, [/I] or [I] Xerox ...[/I]
  • Reply 9 of 107

    The headline says it all: now Apple releases "live up to the hype" of Wall Street, but NOT of users and fans. Good were the times when the OPPOSITE was true.

  • Reply 10 of 107
    MacProMacPro Posts: 16,945member
    Let the iPhone 7, ?Watch 2, iOS 9, A9 and OS X Big Sur rumors and leaks begin .... (damn, wasn't supposed to say that last thing)
  • Reply 11 of 107
    Quote:
    Originally Posted by TheWhiteFalcon View Post



    The only disappointment for me was the 16GB storage being the base on the new iPhones. That just feels cheap. Even as a shareholder it feels cheap.

    Actually, as an investor, the 16GB looks brilliant.

     

    Competing flagship phones increasingly come with 32GB. Apple being Apple, of course they come in low ball with only 16GB but people have come to expect that crap with Apple. Here is where the brilliance comes in...

     

    Apple knows there isn't anyway they could get away with charging $100 for a 16GB upgrade to 32GB. Even with Apple's history of notoriously high prices, that just wouldn't fly. So for $100 they bump it to 64GB. The bulk of Apple consumers will mistakenly think that is a good deal and jump at that model (the incremental cost increase to Apple is almost nothing).

     

    If Apple had equipped the base models with 32GB, for most people, that would be enough and few would feel the need to upgrade to a more expensive model. By equipping the base models with 16GB, a lot more people will now pay for the 64GB models which in turn will greatly increase Apple's margins and profits.

     

    From a business/investor standpoint, it is a great move. Sure, for a consumer it sucks because it effectively raises the price of the new iPhones by $100 but most of them won't catch on to what Apple is doing and will instead praise them for offering a 64GB so cheaply.

     

    To paraphrase an old saying... there is an Apple customer born every minute. :)

     

    -kpluck

  • Reply 12 of 107
    MacProMacPro Posts: 16,945member
    What piqued my interest is that the new product and service announced yesterday: ?Pay and ?Watch -- have abandoned the i prefix used for iPod, iTunes, iPhone, iPad ...

    I suspect that this signifies a new era where Apple intends to make their products as ubiquitous as Kleenex, or Xerox ...

    Yes I also kept noticing 'i' has given way to 'Apple' or '?' throughout the presentation, I was surprised AI didn't headline that fact. Good move IMHO.

    By the way did they ever name the new OS for ?Watch specifically? It isn't iOS nor OS X, it has Watch SDK and a soon to be Watch AppStore so is it Watch OS?
  • Reply 13 of 107
    wizard69 wrote: »
    retrogusto wrote: »
    I haven't seen a lot of attention given to Apple's nefarious strategy of making the new iPhones bigger and therefore a lot harder to get in and out of your pocket, necessitating a wrist-wearble proxy for the device, but I'm pretty sure this is no coincidence!

    One of the reasons I kept my iPhone 4 for so long is that I'm not happy with the idea of filling my pocket with a huge cell phone. If I want a big screen I grab for my iPad. In the end I really believe the market for the so called phablets is already cooling off. Let's face it Samasungs sales aren't all the great outside of certain parts of Asia.

    I agree -- though I bought an iPhone 5S for the 64-bit and TouchID.

    For me, the order of interest in yesterday's announcements was:
    1. ?Pay
    2. ?Watch
    3. iPhone 6 Plus -- because of OIS

    In our household of 2 adults and 3 teenagers, my daughter and my granddaughter (18) do most of the shopping -- so it is a given that they will have TouchID devices to exploit ?Pay.

    The granddaughter is also interested in photography, so she will likely get a 128GB iPhone 6 Plus.

    I am hoping that the new iPads will have equivalent features to the iPhone 6 Plus -- and the ability to replace an iPhone ...

    Like you, I grab the iPad (for it's big screen) -- and I would feel quite comfortable using it to make or receive the occasional phone call ...

    The ?Watch and an iPad would satisfy my needs and offer the best of both (iPhone and iPad) worlds.
  • Reply 14 of 107
    Quote:

    Originally Posted by Dick Applebaum View Post



    What piqued my interest is that the new product and service announced yesterday: ?Pay and ?Watch -- have abandoned the i prefix used for iPod, iTunes, iPhone, iPad ...



    I suspect that this signifies a new era where Apple intends to make their products as ubiquitous as Kleenex, or Xerox ...

     

    Plus they don't have to worry about trademark disputes worldwide. Everyone got on the iBandwagon so it is sort of cluttered up now anyway.

  • Reply 15 of 107
    Let the iPhone 7, ?Watch 2, iOS 9, A9 and OS X Big Sur rumors and leaks begin .... (damn, wasn't supposed to say that last thing)

    Mmm ... Didn't Kim Novak live in Big Sur :D
  • Reply 16 of 107
    slurpyslurpy Posts: 4,938member
    Quote:

    Originally Posted by brlawyer View Post

     

    The headline says it all: now Apple releases "live up to the hype" of Wall Street, but NOT of users and fans. Good were the times when the OPPOSITE was true.


     

    I'm sorry, but when the **** did the keynote "live up" to the expectations of all "users and fans"? There's massive bitching on tech blogs and apple rumors sites after every single keynote in the past decade. Steve Jobs went to bed depressed the night of the iPad reveal, because "fan" reactions online were so toxic. So please, give me the date of this magical, imaginary time of yours. 

     

    Personally, I've watched every keynote in the past 15 years, and this ranks as one of the most impressive- for me, matching or even slightly exceeding (all things considered) the original iPhone reveal. It didnt live up to your "expectations", because you have no clue what you want. I've seen alot of bashing, but very little tangible ccriticisms The iPhone update was "lame" to some (even though its the biggest redesign and change since the iPhone 4), yet these people cant even manage to list features they would have wanted to see, or point out one valid criticism. Its the same old "I'm dissapointed no matter what cause I was expecting magical unicorns" bullshit without an ounce of perspective. Apple gave people exactly what they were asking for, and have been bitching about the last few years with these new iPhones- size options- and a whole lot more. The mobile payments thing is huge. The iWatch is an incredibly well considered product that has a shit-ton of future potential, even if you cant see it now, and will be a whole new platform. The fitness applications are massive, as well as healthkit/homekit. Its stunning to me that people like you are unable to zoom out a bit and appreciate what Apple is doing, and the massive foundations it's laying. 

     

    Well done, for being a drone and having no sense of history. 

  • Reply 17 of 107
    Quote:

    Originally Posted by kpluck View Post

     
    Quote:
    Originally Posted by TheWhiteFalcon View Post



    The only disappointment for me was the 16GB storage being the base on the new iPhones. That just feels cheap. Even as a shareholder it feels cheap.

    Actually, as an investor, the 16GB looks brilliant.

     

    Competing flagship phones increasingly come with 32GB. Apple being Apple, of course they come in low ball with only 16GB but people have come to expect that crap with Apple. Here is where the brilliance comes in...

     

    Apple knows there isn't anyway they could get away with charging $100 for a 16GB upgrade to 32GB. Even with Apple's history of notoriously high prices, that just wouldn't fly. So for $100 they bump it to 64GB. The bulk of Apple consumers will mistakenly think that is a good deal and jump at that model (the incremental cost increase to Apple is almost nothing).

     

    If Apple had equipped the base models with 32GB, for most people, that would be enough and few would feel the need to upgrade to a more expensive model. By equipping the base models with 16GB, a lot more people will now pay for the 64GB models which in turn will greatly increase Apple's margins and profits.

     

    From a business/investor standpoint, it is a great move. Sure, for a consumer it sucks because it effectively raises the price of the new iPhones by $100 but most of them won't catch on to what Apple is doing and will instead praise them for offering a 64GB so cheaply.

     

    To paraphrase an old saying... there is an Apple customer born every minute. :)

     

    -kpluck


     

    I think you guys are looking at it wrong. Apple needed to maintain that $199 low end price. That larger screen with its fancy new technology and all the other crap they stuck in there drove the COGS way up. Shipping the 16GB allows them to sell that low-end with a better margin. Otherwise the low-end could do more damage and erode their margins further. Having the upgrade at $299 for 64GB is quite smart. Users get a usable amount of storage and the upgraded storage is better price per GB for the user. The cost isn't that much for Apple, so it helps to restore a stronger margin on that model. Same goes for the 128GB version. What Apple is trying to do is to end up with an Average margin across the new phones that keeps them as close to where they were as possible. They can take a margin hit when the new products launch, but will need to cut costs and improve margins over time to keep wall street happy. These decisions were really good and I am very impressed with their strategy. 

     

    Look at it this way. If you bought a 5S 16GB for $199, you get NFC, 802.11ac, 4.7" screen, updated ID, new camera sensor, A8 with lots of more capabilities for the same price.

     

    Yeah, Apple is a bunch of tightwads... /s

  • Reply 18 of 107
    What piqued my interest is that the new product and service announced yesterday: ?Pay and ?Watch -- have abandoned the i prefix used for iPod, iTunes, iPhone, iPad ...

    I suspect that this signifies a new era where Apple intends to make their products as ubiquitous as Kleenex, or Xerox ...

    Yes I also kept noticing 'i' has given way to 'Apple' or '?' throughout the presentation, I was surprised AI didn't headline that fact. Good move IMHO.

    By the way did they ever name the new OS for ?Watch specifically? It isn't iOS nor OS X, it has Watch SDK and a soon to be Watch AppStore so is it Watch OS?

    Those are very good questions.

    The only thing mentioned (AIR) was a WatchKit API -- I'll have to go back over the keynote video.

    But, as soon as the Apple Developer sites came back up I searched for anything to do with the ?Watch ... sadly, in vain.

    I got the impression that ?Watch will be able to be used (work) with iPhones, Macs and the ?TV,

    I suspect that the ?Watch has an ARM APU roughly equivalent of an A5 or A6 -- but with lower power requirements.

    If that is so, I believe they could use iOS 8 as the base platform ... But, for political/differentation reasons i think they will make it ?OS, ?Tunes, ?Store, and ?Code IDE for developers.
  • Reply 19 of 107
    First prediction, then. All future MacBooks, and Apple keyboards, mice, and touchpads will come with fingerprint readers, to both tap in to ApplePay and to allow secure login, particularly to shared machines.
  • Reply 20 of 107
    Yes I also kept noticing 'i' has given way to 'Apple' or '?' throughout the presentation, I was surprised AI didn't headline that fact. Good move IMHO.

    By the way did they ever name the new OS for ?Watch specifically? It isn't iOS nor OS X, it has Watch SDK and a soon to be Watch AppStore so is it Watch OS?

    Yes, it is officially "Watch OS", per Rene Ritchie.
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