Wall Street expects iCloud to drive sales of Apple's iOS devices

Posted:
in AAPL Investors edited January 2014
The newly announced iCloud service is expected to further drive sales of iOS devices as users become even more tied in to Apple's increasingly proprietary ecosystem, analysts on Wall Street believe.



Some of the most prominent analysts offered their take on iCloud, iOS 5 and Mac OS X 10.7 Lion following Monday's keynote presentation at the annual Worldwide Developers Conference. Most were wowed by iCloud, viewing it as an important component of Apple's product strategy.



Piper Jaffray



Analyst Gene Munster said Apple is increasing the likelihood that consumers will buy multiple devices. A central drive for Apple will be the free iCloud service, which will automatically share contacts, calendars, messages, photos, apps and music purchased on iTunes.



Going even further, Apple has made it easier for users to cut the cord to their PC. The new iOS 5 mobile operating system will make it possible for users to operate their iPhone or iPad without tethering to a computer and syncing with iTunes.



Apple's decision to make iCloud free will eliminate about 0.3 percent of Apple's revenue in 2011, Munster believes. By his calculations, that number will be easily offset by higher sales of devices.



Munster's overweight rating on AAPL stock and $554 price target also do not take into account pricing on Lion, so in his view the low $29.99 cost of the Mac OS upgrade will not have an impact on his numbers. He also noted that users who make the upgrade to Lion will be more likely to stick with the Mac platform.







Gleacher & Company



iCloud will increase the "stickiness" of the Apple ecosystem, analyst Brian Marshall believes. And while the service will be a financial benefit for Apple in the long run, he does not see it moving the company's "financial needle" in the near future.



Relative to the previews of iOS 5 and Lion, Marshall believes iCloud stole the show, as he called the service "brimming with functionality." He also believes iCloud "will likely far exceed community expectations" with its list of features, including wireless sync, documents in the cloud, and iTunes in the Cloud.



Gleacher & Company has reiterated its "buy" rating and price target of $450 for AAPL stock. Marshall said the key risk for the company remains the health of Chief Executive Steve Jobs, and noted his physical appearance took "an unfortunate turn for the worse" since he last appeared at the iPad 2 introduction in March. "We wish him a full recovery," Marshall wrote.







RBC Capital Markets



iCloud positions Apple for a "post-PC" world, and is a "possible game changer" for the company, analyst Mike Abramsky wrote in his note to investors. Apple's vision with a closed ecosystem of hardware, services, software and applications could help drive the company's next leg of growth and valuation against the competing Google Android platform, he believes.



"By 'cutting the cord' to the PC, Apple may expand its addressable market by 4x, addressing the (about 3 billion) handset users who have a phone -- but not a PC," he wrote. "We believe we may see new devices in time, based off iCloud services."



Abramsky was also impressed by iOS 5 and Lion, which he said reflect Apple's "trademark user experience," highlighting convenience, simplicity and discoverability. The new products and services unveiled by Apple on Monday "have the potential to significantly expand and defend Apple's franchise," he said.



RBC Capital Markets has reiterated its outperform rating for AAPL stock, as well as its price target of $450.







Ticonderoga Securities



Analyst Brian White believes iCloud, Lion and iOS 5 further enhance Apple's ecosystem, and he was also encouraged by the appearance of Jobs at Monday's keynote. He believes the biggest announcement was iTunes in the Cloud.



"Clearly, the most anticipated app for iCloud was bringing iTunes into the cloud, allowing consumers to push already purchased songs into the cloud across Apple devices, while automatically downloading future song purchases across devices," he wrote.



White has reiterated his buy rating and 12-month price target of $612 for AAPL stock.



Deutsche Bank



"iCloud hits take-off velocity," analyst Chris Whitmore's note to investors reads. Like others, he didn't change his financial outlook for Apple based on iCloud, but he believes in time the service will attract new users and developers.



"We believe iCloud will greatly increase the stickiness of the Apple platform, particularly for multi-device iPad/iPhone/Mac owners, and further differentiate the AAPL platform in terms of scale and size," he said.



Whitmore has maintained a buy rating and price target of $450 for AAPL stock.







J.P. Morgan Research



Analyst Mark Moskowitz was less impressed than his peers, declaring there was "no wow factor at WWDC." Still, he believes iCloud and other improvements will likely keep Apple ahead of its competitors.



"While WWDC did not introduce a major, new product category or refresh, we think there were plenty of incremental building blocks for driving above-peer revenue growth," he said. "Of note, the iCloud service stands to further cement Apple's role in constructing a 'way of life' for the user."



Moskowitz and J.P. Morgan have maintained an "overweight" rating for AAPL stock, with a price target of $450.



JMP Securities



Analyst Alex Gauna is less bullish about AAPL stock than others on Wall Street, and he came away unimpressed with Monday's keynote, declaring it "cloudier, with less lightning bolts, than normal." He also said the presentation had "no real surprises," and was merely an evolutionary step for Apple.



Gauna noted that the company's stock dropped more than 1.5 percent in response to the keynote, and he said he agreed with the reaction from investors. He was particularly disappointed by the lack of new hardware, which he said is needed to "stem the tide of faster Android adoption, or to make enterprise inroads."



Still, Gauna said that Lion and iOS 5 updates are "likely to please the Apple faithful and keep Apple products best in class with regard to intuitiveness and usability." He also said iCloud should maintain the dominance of iTunes.



Gauna remains concerned about Apple's "ability to execute without a healthy CEO," and as such has reiterated a "Market Perform" rating for AAPL stock, without a set target price.
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Comments

  • Reply 1 of 67
    z3r0z3r0 Posts: 238member
    iCloud looks like it trumps ChromeOS.
  • Reply 2 of 67
    hittrj01hittrj01 Posts: 753member
    Isn't this kind of the point? Build up even more of an ecosystem to attract sales to your devices and guarantee repeat sales to existing customers?



    Someone needs to tell these analysts that making common sense statements does not make them smart.
  • Reply 3 of 67
    solipsismsolipsism Posts: 25,726member
    We finally got the digital purchase peace-of-mind. This is big.



    I can't believe some of the stuff I've bought over the year but it lends to another issue. If this stuff is going to follow me I need way of removing it. There are some apps and songs I simply do not want and even though that list of "items not on your device" is manageable now it will get more out of control as I test various apps and other media.





    Quote:
    Originally Posted by z3r0 View Post


    iCloud looks like it trumps ChromeOS.



    They are not comparable in that way.





    Quote:
    Originally Posted by hittrj01 View Post


    Isn't this kind of the point? Build up even more of an ecosystem to attract sales to your devices and guarantee repeat sales to existing customers?



    Someone needs to tell these analysts that making common sense statements does not make them smart.



    Yeah, but MobileMe and .Mac were suppose to make the ecosystem more attractive to the average user but they failed to do so. This is more-or-less analysts saying Apple finally got it right.
  • Reply 4 of 67
    mactacmactac Posts: 315member
    Quote:

    The newly announced iCloud service is expected to further drive sales of iOS devices as users become even more tied in to Apple's increasingly proprietary ecosystem, analysts on Wall Street believe.



    Not for me. I'm still looking for the mid sized Mac I want. Without the Apple computer that meets my needs I'm not about to spend money on any of Apple's other products.



    I'm an 18 year Mac user waiting for my next Mac. Only then will I begin to take a look at anything else from Apple.
  • Reply 5 of 67
    lilgto64lilgto64 Posts: 1,147member
    on NPR this morning they explained how the lack of streaming service is such a let down and disappointment after all the hype leading up to the announcement that this would be the central point of the new features/functions.



    Not sure if this is unique to Apple or not - but what the heck - the only people hyping streaming were basing their hype on their own speculation or their own personal preference or what other companies are doing. Not once did Apple ever "hype" streaming service coming soon.



    Along with that - I suppose I can understand a certain level of hey that's not quite what I expected - but lets hold off on the disappointment until we can actually use it and see how it works before crying foul.



    Hey I made a prediction based on speculation and it turned out to be wrong - gee I am so disappointed. Doesn't make any sense to me.
  • Reply 6 of 67
    blastdoorblastdoor Posts: 2,680member
    Quote:
    Originally Posted by lilgto64 View Post


    on NPR this morning they explained how the lack of streaming service is such a let down and disappointment after all the hype leading up to the announcement that this would be the central point of the new features/functions.



    Not sure if this is unique to Apple or not - but what the heck - the only people hyping streaming were basing their hype on their own speculation or their own personal preference or what other companies are doing. Not once did Apple ever "hype" streaming service coming soon.



    Along with that - I suppose I can understand a certain level of hey that's not quite what I expected - but lets hold off on the disappointment until we can actually use it and see how it works before crying foul.



    Hey I made a prediction based on speculation and it turned out to be wrong - gee I am so disappointed. Doesn't make any sense to me.



    I agree -- I have no interest in streaming. Why would I want to spend a lot of $$ on expensive bandwidth to stream music over 3G when portable storage is (relatively) much cheaper?
  • Reply 7 of 67
    personmanpersonman Posts: 60member
    Quote:
    Originally Posted by AppleInsider View Post


    JMP Securities



    Analyst Alex Gauna ... noted that the company's stock dropped more than 1.5 percent in response to the keynote, and he said he agreed with the reaction from investors.



    Um, correct me if I'm wrong, but AAPL stock ALMOST ALWAYS drops a bit after a keynote. I don't think this is a reaction to the content of the keynote.
  • Reply 8 of 67
    I'm not sure analysts see the implications for small business.



    Its generally assumed that the business market is, and always will be, lost to the Mac platform, but this new ecosystem makes the Mac platform extremely attractive to small business < 50 users. Particularly those that want to dump the cost of Microsoft's exchange and server platform. Frankly, iWork is a reasonable replacement for office, and the back to may mac and other sharing features embedded in the new cloud service make this even more feature rich for small business. I foresee that users that grew up on iPods may be more likely to embrace the Apple experience in the work place due to perceived usability and low cost of ownership.
  • Reply 9 of 67
    forisforis Posts: 25member
    Alex Gauna uses all the tired old language of the sort of Windows advocate who mostly disappeared five years ago. Given the explosion in numbers of Apple users over the last 10 years, how stupid does he look talking about "Apple faithful", something which conjures up images of the huddle of Mac users left in the late '90s.



    Perhaps he should leave his decrepit agenda behind, and actually try to give his clients useful (read profitable) advice.
  • Reply 10 of 67
    bigmac2bigmac2 Posts: 639member
    Quote:
    Originally Posted by AppleInsider View Post


    Analyst Mark Moskowitz was less impressed than his peers, declaring there was "no wow factor at WWDC." Still, he believes iCloud and other improvements will likely keep Apple ahead of its competitors.



    I getting tired of disappointing comment we always get after WWDC. It's most of the time the same comments: No hardware announcement, boring OS demo, too much technical stuff. For god sake I think people and general media just forget about what the WWDC is really about. People tend to associate WWDC Keynote to old MacWorld Keynote which is not.



    For everyone who is disappointed by WWDC announcement keep in mind this event is mean for developer only, the event is made for get developer in touch with new Apple software making sure they will be ready for Apple new OS in the next few months.
  • Reply 11 of 67
    lilgto64lilgto64 Posts: 1,147member
    Quote:
    Originally Posted by PersonMan View Post


    Um, correct me if I'm wrong, but AAPL stock ALMOST ALWAYS drops a bit after a keynote. I don't think this is a reaction to the content of the keynote.



    Wasn't that guy who predicted the end of the world a former Goldman-Sachs Securities Broker?



    I have wondered for YEARS why Apple stock goes DOWN after a KeyNote and or quarterly report in which they report all time high records for unit sales and iTunes sales and customer numbers and profit margin etc. Reports that from ANY other company on the planet would cause the stock prices to increase - but no - the hype and speculation and expectations placed on Apple are so high - that anything short of stunningly spectacular is seen as a disappointment - and merely impressive and ahead of the industry as a whole is seen as problematic.
  • Reply 12 of 67
    blastdoorblastdoor Posts: 2,680member
    While it's certainly true that this increases the value of staying in the Apple "ecosystem", I don't agree with the coercive tone used by analysts and pundits to describe this situation. To a very great extent -- certainly a far greater extent than one would imagine from casually listening to the punditocracy -- iOS and MacOS devices do not "lock-in" or otherwise strong-arm users into using things they don't want to use. For the most part, if you don't want to buy in to Apple's way of doing things, you don't have to. You can buy an iPhone yet use gmail, Pandora, Opera, and many other alternatives to Apple's apps. You don't have to use mobileMe (or iCloud) for synching -- you can use Exchange or other services. You can even play music bought from other music stores in iTunes and/or you can play iTunes songs on other devices (less true of video due to DRM, but that's the content owner's fault, not Apple's).



    These Wall Street guys are still stuck in the Microsoft/Intel mentality of winning by monopolistic coercion rather than winning by making the best product. One of the vastly under-appreciated aspects of Apple's rise is that they have done it without monopolizing anything. Their two major platforms are iOS and OSX, and neither has anything close to the kind of market share that Microsoft has achieved with Windows or Intel with their x86 chips. You basically have to slice markets pretty thin in order to see big marketshares for Apple -- the mp3 player market is one where they have about 75% share (still less than MS or Intel) and the "tablet" market is one where they utterly dominate, but that most likely won't last.



    I think this bias in favor of coercive monopolization is one reason that Apple's stock seems so lackluster. The Wall Streeters are worried that there isn't enough "lock-in" -- they're worried that people only buy Apple products because people like Apple products, not because they have no choice. What happens if people suddenly stop liking Apple products? What's to keep people buying Apple products even if they start to suck? -- that's the big worry for the Wall Street guys. But it's not Apple's worry -- it's Apple's obsession. Apple knows that their success depends on making great products and so they are more focused on that than any of their competitors. And that's why I have a lot more confidence in the future of AAPL than the wall street guys do.
  • Reply 13 of 67
    morkymorky Posts: 198member
    Quote:
    Originally Posted by MacTac View Post


    Not for me. I'm still looking for the mid sized Mac I want. Without the Apple computer that meets my needs I'm not about to spend money on any of Apple's other products.



    I agreed with that sentiment when iMacs were underpowered, but they no longer are. The mid-sized option is now represented in the iMac lineup.
  • Reply 14 of 67
    lkrupplkrupp Posts: 9,991member
    Why can't the tech wannabes get it through their thick heads that the world doesn't want, use, or even think about what they (the tech wannabes) consider absolutely essential? Why do you think Apple has seen so much success in recent years? It's precisely because they have ignored the tech wannabes want and have concentrated on what real people want and need, and actually like to use. It is my opinion that the tech wannabes have actually helped Apple succeed. They whine and pontificate about everything Apple puts out. They are insufferable bores to their families and any friends they may have. They probably drive more people TO Apple rather than away. To be sure the fanatical Apple fanboys are just as insufferable but there are less of them than the tech wannabes. A new Verizon television spot for their tablets shows a mother asking the sales person about tablets. Her nerdy, insufferable bore, pimply faced punk of a tech wannabe son starts peppering the sales person with the usual tech wannabe questions about, of course, Flash among other things. I'm sure this commercial is a big turn off to many people who have the same punk in their family.



    Point is (and I do have one) is that most of these analysts fancy themselves techies. They are not. They have no clue what Apple is about. That's what scares me about Jobs leaving some day, that Apple will become the next Microsoft, a tech giant resting on its laurels and actually paying attention to analysts and investors.
  • Reply 15 of 67
    sunnysunny Posts: 1member
    If I couldn't share my documents on MobileMe because everything was sooooo slow, how will they expect things to run smoothly when *everyone* will be in/on/using the cloud?
  • Reply 16 of 67
    11thindian11thindian Posts: 181member
    Quote:
    Originally Posted by MacTac View Post


    Not for me. I'm still looking for the mid sized Mac I want. Without the Apple computer that meets my needs I'm not about to spend money on any of Apple's other products.



    I'm an 18 year Mac user waiting for my next Mac. Only then will I begin to take a look at anything else from Apple.



    Are you talking about the mythical mini tower? Do you really expect that's ever going to happen? When such a marginal part of Apple's business is even desktops, when and even smaller single digit percentage of that market is buying MacPros, how could you possibly believe that what you want is in Apple's future?



    For the very small minority of people buying MacPros, they want the space for expansion, so I'd be very surprised to see Apple change the current form factor in any measurable way for the time being.



    Apple is on a path of narrowing and sharpening it's Mac product line, not building out to meet the needs of a small percentage of a small percentage of it's user base.



    I don't want to seem harsh, but your desktop options are MacMini, iMac, or MacPro. If none of those "meet your needs", I don't see Apple ever releasing the Mac for you.
  • Reply 17 of 67
    anonymouseanonymouse Posts: 6,681member
    Quote:
    Originally Posted by AppleInsider View Post


    The newly announced iCloud service is expected to further drive sales of iOS devices as users become even more tied in to Apple's increasingly proprietary ecosystem, analysts on Wall Street believe. ...



    This characterization of Apple's ecosystem as "increasingly proprietary" is entirely mistaken. It's no more of less proprietary than it has always been. What it is now is increasingly complete, rich, seamless, transparent, enticing, compelling, ... take your pick, but not "increasingly proprietary".
  • Reply 18 of 67
    thepixeldocthepixeldoc Posts: 2,257member
    Quote:
    Originally Posted by lkrupp View Post


    Why can't the tech wannabes get it through their thick heads that the world doesn't want, use, or even think about what they (the tech wannabes) consider absolutely essential? Why do you think Apple has seen so much success in recent years? It's precisely because they have ignored the tech wannabes want and have concentrated on what real people want and need, and actually like to use. It is my opinion that the tech wannabes have actually helped Apple succeed. They whine and pontificate about everything Apple puts out. They are insufferable bores to their families and any friends they may have. They probably drive more people TO Apple rather than away. To be sure the fanatical Apple fanboys are just as insufferable but there are less of them than the tech wannabes. A new Verizon television spot for their tablets shows a mother asking the sales person about tablets. Her nerdy, insufferable bore, pimply faced punk of a tech wannabe son starts peppering the sales person with the usual tech wannabe questions about, of course, Flash among other things. I'm sure this commercial is a big turn off to many people who have the same punk in their family.



    Point is (and I do have one) is that most of these analysts fancy themselves techies. They are not. They have no clue what Apple is about. That's what scares me about Jobs leaving some day, that Apple will become the next Microsoft, a tech giant resting on its laurels and actually paying attention to analysts and investors.



    +1 Great post!
  • Reply 19 of 67
    anonymouseanonymouse Posts: 6,681member
    Quote:
    Originally Posted by MacTac View Post


    Not for me. I'm still looking for the mid sized Mac I want. Without the Apple computer that meets my needs I'm not about to spend money on any of Apple's other products.



    I'm an 18 year Mac user waiting for my next Mac. Only then will I begin to take a look at anything else from Apple.



    I'm waiting for the 100MPG, non-hybrid, gasoline-powered, internal combustion automobile. I bet that comes before the "mid sized Mac [you] want" arrives. At this point, it's just irrational to be waiting for a Mac that's so obviously not going to be produced.
  • Reply 20 of 67
    thepixeldocthepixeldoc Posts: 2,257member
    Quote:
    Originally Posted by 11thIndian View Post


    Are you talking about the mythical mini tower? Do you really expect that's ever going to happen? When such a marginal part of Apple's business is even desktops, when and even smaller single digit percentage of that market is buying MacPros, how could you possibly believe that what you want is in Apple's future?



    For the very small minority of people buying MacPros, they want the space for expansion, so I'd be very surprised to see Apple change the current form factor in any measurable way for the time being.



    Apple is on a path of narrowing and sharpening it's Mac product line, not building out to meet the needs of a small percentage of a small percentage of it's user base.



    I don't want to seem harsh, but your desktop options are MacMini, iMac, or MacPro. If none of those "meet your needs", I don't see Apple ever releasing the Mac for you.



    Also a good reply to that incessant b****ing and whining about wanting something that will be obsolete in less than 5 years.



    If it was even a thought at Apple... it was laid to rest and buried over 6-7 years ago, the hey-day of towers.



    @MacTac : Just curious... but what are/were you willing to pay for that mythical mini-tower?
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