Apple bulls found plenty to like about Wednesday’s big keynote speech, although like any major piece of news, there are going to be bears as well. In this case, Apple bulls overall seemed to be more interested in the extra little goodies the company tucked in around the iPhone 6S announcement.
iPhone upgrade program to boost unit sales
One of those items that piqued many analysts’ interest was the new iPhone upgrade program and the country/ carrier launches. The program allows consumers to lease iPhones on plans starting at $32 per month, which allow them to choose their carriers.
New carrier leasing plans start at $19 per month for the iPhone 5S and range up to $31 per month for the iPhone 6S Plus, but they lock buyers into the carrier they buy from. Wells Fargo Securities Senior Analyst Maynard Um and his team see multiple positives in that program
For example, the program could cut the upgrade cycle to one year instead of two, as currently many carriers only allow subscribers to upgrade their phones every other year. The program could also drive more buyers to purchase directly from Apple and might help the company “economically,” depending on the timing of the upgrades and any residual trade-in value of the phones that are traded in.
Morgan Stanley analyst Katy Huberty and her team believe the new upgrade program will boost iPhone units by about 6.5 million units in the 2017 calendar year. She assumes 10% of iPhone buyers in the U.S. during 2016 choose the program and all upgrade the following year.
iPad Pro, Apple TV, Apple Pencil also interesting
JPMorgan analysts Rod Hall and Ashwin Kesireddy said Wednesday’s product announcements reinforce their “iAnywhere and Apple TV gaming thesis.” Apple is targeting enterprise customers with the tablet/ laptop hybrid device, which would bring its reach beyond consumer hands.
They also like the Apple Pencil (don’t call it a stylus!) and the Apple TV set-top box. They don’t see much of an impact on the company’s earnings from these other products, however. They expect about a 0.6% increase to Apple’s 2016 calendar year earnings, including cannibalization of the Mac. They estimate that the Apple Pencil will be about 0.7% accretive to their 2016 earnings estimates, while they think the Apple TV hardware may add 0.8% and gaming apps for it could add 0.9% to their 2016 earnings estimates.
Upgrades for the iPhone 6S
Of course there was plenty of reaction to the iPhone 6S and 6S Plus unveilings as well. Um and his team like the 3D Touch upgrade for the iPhone 6S, and they think it’s as big of an upgrade as the Touch ID fingerprint scanner was for the iPhone 5S. However, they think it will take some time for consumers to fully appreciate it because they will probably have to test it out first.
The Wells Fargo team also noted that sentiment on the transition from the iPhone 6 to the iPhone 6S cycle seems to be just as negative as it was for the transition from the iPhone 5 to the iPhone 5S. They believe that like the 5 to 5S transition that sentiment on the iPhone 6S will also recover as sentiment on the iPhone 5S recovered because Apple sold more units than expected.
Will the iPad Pro cannibalize the MacBook?
In general, most analysts agree that the large iPad will have some cannibalization impact on the MacBook, although of course the degree of that cannibalization varies from firm to firm. The 32-gigabyte iPad Pro is priced at $799, while the 11-inch 128-gigabyte MacBook Air is priced at $899 and the 13-inch 128-gigabyte MacBook Air is priced at $999.
Then when the keyboard is added to the iPad Pro, that brings the price to $968. The Wells Fargo team thinks there might be “some” cannibalization, but the tradeoff on flash memory could minimize that, they believe. Also the iPad Pro should boost average selling prices while the price drop for the iPad Mini 2 should help unit numbers.