Some Wall Street analysts recently voiced their opinions that the new products revealed by Apple Inc. (NASDAQ:AAPL) during the annual Worldwide Developers Conference (WWDC) on Monday were impressive, but unlikely to impress investors.
Jefferies analyst Peter Misek shared the same conviction that Apple Inc. (NASDAQ:AAPL) did a great job with the iOS 7, but did not change his investment outlook for the company. In fact, he maintained his “hold” rating and $420 price target for the stock.
Misek explained, “They did a beautiful job. Unfortunately, it is not going to change the biggest dynamic: that up to 70 percent of Apple Inc. (NASDAQ:AAPL)’s profits come from iPhone and that market is rapidly maturing.”
Apple Needs More Than Just Upgrading Its OS
This means that Apple Inc. (NASDAQ:AAPL) needs more than just upgrading its operating system or existing products to boost its sales, to restore the confidence of investors and increase its stock value. According to Misek, “I keep trying to tell Apple: you are a victim of the market’s success.”
According to Misek, there is simple solution or prescription for Apple Inc. (NASDAQ:AAPL) to move its stock up, “Find a new category to innovate.”
Several Investors Sold Apple Stock:
Morningstar equity analyst Brian Collelo speculated that several investors sold their shares in Apple Inc. (NASDAQ:AAPL) after the company’s announcement at the WWDC. According to Collelo, investors were hoping that the company would release something different not just a new version of the operating system or MacBooks.
Collelo said, “Investors would be much more excited if there was a new Apple TV or an Apple iWatch. I am sure some investors out there were hoping for a different iPhone product or an iPad announcement. Hope does spring eternal among Apple fans, but when investors didn’t get their new hardware itch scratched, it’s buy the rumor, sell the news.”
Andy Hargreaves, an analyst at Pacific Crest Securities, also commented that investors do not pay as much attention to software design because they believe that the average person doesn’t go to the store to buy hardware based on the software offered with it.
Hargreaves said, “That view may underestimate what good software design can do, particularly from a retention standpoint, but it explains why people may seem unimpressed.”
On the other hand, analysts at Credit Suisse Equity Research commented that the iOS 7 and Mac OS Mavericks provide Apple Inc. (NASDAQ:AAPL) a competitive advantage in computing. They reiterated their outperform rating for the stock and $525 price target. They also maintained their estimates of $170.4 billion revenue and $39.85 EPS for 2013, and $189 billion revenue and $48.67 EPS for 2014.
Credit Suisse analysts believe that Apple Inc. (NASDAQ:AAPL) will be able to monetize iTunes Radio through advertising or subscription, which could provide a meaningful revenue contribution over time.