Today, Apple Inc. (NASDAQ:AAPL) previewed iOS 7 at Worldwide Developers Conference 2013 (WWDC) in addition to announcing a streaming music service. While these announcements were largely expected, Gene Munster, the well-known Apple analyst at Piper Jaffray believes that the improvements in iOS 7 should give iPhone users, and investors, a new reason to be excited about their iOS devices and subsequent new phones/tablets.
At the end of the day, Munster believes iPhone users get over new hardware within a few hours when updating their phones, but the OS is what mesmerises people longer term. Overall, he believe the event sets the stage for new products over the next 6 quarters including iPhone 5S, a cheaper iPhone, a television, iPhone 6, iWatch, and possibly a payments solution. His research firm reiterate its Overweight rating and $655 target for Apple Inc. (NASDAQ:AAPL).
Apple’s Cheaper iPhone, iTV, iWatch:
While the actual product announcements at WWDC were essentially in-line with research firm’s analysts prior thinking, they believe the updates to iOS 7 are better than expected. Over the next 12-18 months Munster continue to believe that Apple Inc. (NASDAQ:AAPL) will appreciate ahead of new products, which will include numerous new product releases as well as the entry of new product and service categories. Most importantly, Gene Munster expects a cheaper iPhone in September/October, a TV announcement by the end of the year, and a watch and larger screen iPhone in 2014.
Apple’s new iOS 7:
Apple Inc. (NASDAQ:AAPL) announced iOS 7, which includes a completely different look and feel than the prior 6 versions of the OS. iOS 7 is the first version of the software under Jony Ive’s control. The new iOS design appears flatter and cleaner than the prior version. Munster believes iOS 7 is a reason for users to get excited about their iPhones again by giving it a new feel, which is something that his research firm believe has been lacking in the past iOS updates and subsequently device launches, regardless of hardware redesign.
Apple’s iRadio:
As expected, Apple Inc. (NASDAQ:AAPL) announced iTunes Radio, its new music service. Munster notes that with 575 million iTunes accounts, Apple Inc. (NASDAQ:AAPL) has the chance to garner widespread usage of the service when compared to Spotify which is approaching 30 million users with about 7-8m paid, and Pandora, with 70 million active users and 2.5m paid as of April 2013.
Apple Inc. (NASDAQ:AAPL) noted that the service would be ad-free for iTunes Match customers, while the free product would be ad supported. If Apple Inc. (NASDAQ:AAPL)’s music service were to equal Pandora’s Street revenue estimate in CY14 of $875m, it would add about 0.5% to overall revenue.
More importantly, Munster view the music offering as an opportunity to show consumers that Apple Inc. (NASDAQ:AAPL) can deliver new, useful services with great experiences to make up for disappointments in Mobile Me and Maps.
