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).
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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.
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.