I have summarized nine sell-side analysts thoughts on Apple’s announcement today. While almost all expect a 5.5” iPhone to be unveiled (along with a 4.7" model) there is a bit of difference if the iWatch will make the light of day (I think it will but its availability will be late this year or early next year). A payments solution sounds like it will be part of the event due to the flurry of recent articles about both payment firms and various retailers.
To get a feeling on how Apple’s stock may react to the various product and feature announcements this is a link to a post I wrote describing over a dozen potential items that Apple may launch.
The company is also doing a live webcast available via this link.
Tim Arcuri at Cowen
Arcuri expects Apple to announce two versions of the iPhone 6 (a 4.7" display model and a larger, 5.5" display ‘phablet’ model) and two versions of the yet to be officially named “iWatch” (a 1.34" display model and a 1.53" display model). Relative to iPhone 6, he expects a calendar 2014 build of about 100 million units and expects less than 10% of total iPhone 6 shipments through year-end to include Sapphire glass since supply remains very constrained. Arcuri expects Sapphire to initially be available only on the highest-end iPhone 6 SKUs which he believes will be new 128GB SKUs for both the 4.7" and 5.5" models.
Relative to iWatch, current Street estimates suggest there is still significant uncertainty around both the device’s ultimate functionality and the incremental fiscal 2015 revenue and gross margin impact of the device.
Rod Hall at JP Morgan
Hall believes Apple will most likely announce both 4.7” and 5.5” models of the iPhone 6 but that only the larger version will have image stabilization. Sapphire Glass may only show up in the 5.5” versions with larger memory, if at all, due to manufacturing issues and its higher cost.
Andy Hargreaves at Pacific Crest
Hargreaves expects the company to announce new iPhones as well as a partnership with Visa and possibly other major networks to support mobile payments, details on the company's HealthKit and HomeKit platforms, and possibly the iWatch. Even if the company does not announce the iWatch next week, he believes Apple is likely to launch the product within the next six months. Overall all of these new products and services hold more potential to increase iOS customer retention than to drive meaningful near-term profits.
Katy Huberty at Morgan Stanley
Huberty expects Apple to launch two new iPhones with 4.7” and 5.5” screens, both larger than the current 5s/5c at 4”, unveil a wearable device, which is a brand new product category for Apple, and announce a new payment service.
Apple's Sapphire supplier GTAT said on their earnings call a month ago that they were facing challenges ramping up production, and Apple had delayed the last installment of its prepayments for the product. She assumes the new iPhones will not have Sapphire at launch but do not expect that to impact demand.
Huberty doesn’t believe this year will be a “sell the news” scenario and has 8 reasons that Apple shares should be owned.
Steve Milunovich at UBS
Milunovich believes the 5.5" iPhone 6 probably won't ship immediately due to problems with in-cell touch and the iWatch might not be available until next year. Investors should not care much as revenue gets evened out though consumers might need a 5.5" phone for comparison purposes to make decisions.
A payments push with NFC and network partnerships could result in annuity revenue that capitalizes on the ecosystem. Apple is right to focus on physical store transactions, which are much larger than online.
Milunovich expects Cook to address iCloud security as Apple gets ready to rollout HealthKit. This strategy provides a way for Apple to try and control the messaging and press regarding the recent hacking of celebrity photos.
Gene Munster at Piper Jaffray
Munster expects the iPhone 6 to be announced with two new screen sizes. He also believes the new phone will have NFC technology with a 70% chance of an announcement around payments. Finally, Munster gives the iWatch a 50% chance of being announced.
His reasoning that the iWatch won’t be announced is that Apple seems less likely to launch a new product category alongside the iPhone when it could dilute some of the attention from the core product vs. launching alongside iPads, which are expected to get more modest updates. If it isn’t brought to light in September he believes that it will be announced at an October/November iPad event and be available during the holiday quarter.
Ben Reitzes at Barclays
Reitzes expects Apple to showcase larger iPhones with a set of key new features that could get the customer base more excited. Aside from solid new hardware specs, he also believes Apple could unveil a long-awaited payments offering, linking NFC to iBeacon technology, leveraging the company’s vast trove of credit card information within iTunes. The push into the payments could include technology that provides a “secure element” that could lower processing costs (i.e. card “present” vs. “not present” fees) and allow transactions to take place seamlessly between iOS devices that are within range.
Reitzes would not be surprised to see some interesting new haptics features with the new iPhones, which could improve typing, gaming and notifications experiences. There is also the possibility that the iPhone 6’s price could be raised in certain configurations as Apple justifies new features and greater computing power.
He believes there is still a possibility that an “iWatch” could be introduced, with a focus on lifestyle and personal fitness. It would ship in small volumes after Thanksgiving at the earliest with most volumes likely to ship in calendar 2015.
Andrew Uerkwitz at Oppenheimer
Uerkwitz believes that sensors, device intelligence and being ubiquitous connectivity (or the Internet of Things) will create contextual awareness-related solutions. He believes that Apple’s iPhone 6 will include a barometer and that Siri in iOS 8 being “always-on” and “hands-free” is another step in its usability. QuickType provides smarter autocomplete suggestions and that contextual awareness (realizing what other devices and services are nearby such as being at an airport and telling you what gate to go to and if your flight is on time) is key for Apple and other consumer device companies over the next decade.
He thinks that if the iWatch is ready for primetime then it makes sense to announce it at the same time as the iPhone as he sees it as an extension of it. However if there are any potential production delays then it should be postponed as the iPhone should be enough to carry the day’s announcements.
Brian White at Cantor
White is expecting a 4.7-inch iPhone 6 and 5.5-inch iPhone Air to be unveiled the potential for a staggered launch, with the 4.7-inch available sooner than the 5.5-inch.
Apple could unveil the "iWatch" but not make the new product immediately available for purchase, which is in line with the company's historical pattern. For example, Apple's last two major new product categories (iPhone’s and iPad’s) were unveiled 6 months and over 2 months, respectively, before consumers could actually purchase the new devices. This allows Apple to create a tremendous amount of free marketing buzz ahead of availability and the lag does not eat into existing sales. White believes Apple would be wise to have the "iWatch" ready for holiday purchases in December (not going out on a limb with that statement).
