Analyst: Apple Will Not Disappoint on September 9
Ahead of Apple’s September 9 event and amid high expectations for the iPhone 6, iOS 8, and new features — confirmed and unconfirmed — like HomeKit, HealthKit, and an NFC mobile payments system, investment bank Piper Jaffray is optimistic that next week’s announcements will kick off a successful season for Apple.
In a note to investors on Tuesday, Piper Jaffray analyst Gene Munster raised his price target for Apple to $120 from $105. He expects the upcoming launch of new products and services to “give investors optimism,” citing the iWatch, HomeKit, HealthKit, and payments as evidence that the “platform theme is expanding.” HomeKit and HealthKit are both frameworks launching with the iOS 8 mobile operating system, and will enable developers to more closely integrate third-party accessories and apps with the iPhone and iPad.
HomeKit will enable users to control connected smart home devices, and HealthKit will enable devices and apps to share health and fitness-related data with each other and with Apple’s iOS 8 Health app. Both platforms were unveiled with iOS 8 at Apple’s Worldwide Developers Conference in June.
With a September 9 event confirmed and a September 19 availability date implied, Munster expects the launch of the iPhone 6 in two different sizes. The two screen sizes are expected to be 4.7 inches and 5.5 inches, both larger than the 4-inch display of the iPhone 5S and 5C. On Forbes, Gordon Kelly writes that the 4.7-inch model is expected to be virtually identical in size to the Google Nexus 5, a popular Android smartphone, with leaked schematics putting the iPhone 6 at 5.438 by 2.63 by 0.27 inches versus the Nexus 5′s measurements of 5.43 by 2.72 by 0.34 inches.
While the new screen sizes demonstrate Apple’s acknowledgment of consumers’ desire for larger phones, Kelly notes that the iPhone 6 will necessitate a period of adjustment for — and possibly negative feedback from — current iPhone 6 users, who may need to rearrange their home screens, change their usage patterns, and develop new muscle memory as they switch to a larger phone. In any case, larger screen sizes will put the iPhone back on the map for consumers who previously would have only considered models by Samsung, LG, and Sony.
Given a belief that the new iPhone will have NFC, or near-field communication, Munster gives it a 70 percent chance that Apple will make an announcement regarding “some payments feature.” He explains his rationale with the belief that Apple doesn’t introduce features to its devices “just to introduce features.”
Accordingly, Munster believes that if the iPhone 6 does have NFC, then Apple will also announce a specific application for the feature. He cites a payments system as “the most logical application.” He also notes that the iPhone would be the driver of Apple’s payments platform, not the iWatch, so such a system would be announced either at the iPhone event “or not at all.”
The initial form of the payments system could enable NFC use at Apple Stores or at other retail partners with NFC capability, with iBeacon integration coming later in the evolution of the platform. Wired’s Christina Bonnington recently reported that the next iPhone will feature a mobile payments system underpinned by NFC, which enables communication between devices.
With NFC, the iPhone could use card emulation to let consumers tap their iPhones on a pad at the checkout counter to pay for their groceries, for example. But retailers would have to sign on to receive such payments and implement the hardware at their stores. Re/code’s Jason Del Ray reported that Apple is partnering with American Express on an iPhone payments system that would enable consumers to use their iPhones instead of credit cards, debit cards, or cash at brick-and-mortar stores.
American Express is just one of the companies from which Apple would need approval, as the mobile payments system would likely necessitate agreements with the credit card network or the bank that issued a customer’s card. Apple has reportedly also spoken with Visa and MasterCard regarding the mobile payments system.
Munster also gives the iWatch a 50 percent chance of being announced at the September 9 event. However, he believes that Apple is less likely to announce a new product category alongside the new iPhone when it could dilute attention from the iPhone. Munster believes that if the iWatch isn’t announced on September 9, it will be announced at an event for the iPad, which is expected to receive more modest updates than the iPhone, in October or November.
Counter to recent speculation, Munster believes that the iWatch will be available to consumers during the holiday quarter, despite recent news like Re/code’s John Paczkowski’s reporting that the iWatch won’t ship until early 2015, even though Apple is expected to showcase the wearable device at the event next week.
Looking ahead to the “opening weekend” for iPhone 6 sales, Munster notes that a comparison to last year’s launch of the iPhone 5s and iPhone 5c is complex. Last year, Apple launched the flagship 5s and the less expensive 5c, in essence the iPhone 5 with a plastic back. The company reported selling 9 million units during the opening weekend, but Munster believes that up to 3 million of those units were “channel fill,” or iPhone 5c units replacing the iPhone 5 on shelves.
Munster estimates that Apple actually sold through about 6 million iPhone units during the iPhone 5s/5c launch weekend, and believes that 5.4 million of those units were iPhone 5s devices. Taking that figure into account, the actual numbers for the iPhone 6 launch weekend to beat are the iPhone 5s’s 5.4 million and the iPhone 5′s 5 million in 2012.
Munster expects Apple to sell 6.5 million iPhones in the iPhone 6′s opening weekend, and notes optimistically that if there are no supply constraints, Apple could report an opening weekend figure of 14 million units, including channel fill. He notes, “While the opening weekend may prove to be a speed bump to shares, we expect additional product launches and the platform theme to move shares higher through year-end.”
However, it’s unclear whether we can rule out supply constraints, especially if some iPhones will ship with sapphire crystal screens. Munster expects the 4.7-inch and 5.5-inch models of the iPhone 6 to launch at the same time, at the September 9 event. He also expects that Apple will upgrade the 64GB versions of the iPhone 6 to a sapphire screen, “as an early market test to see consumer feedback for sapphire screen phones with the eventual intention of moving the whole product line to sapphire within 2 years.”
Based on a survey of iPhone 5s buyers, Piper Jaffray found that 25 percent of buyers opt for the 64GB capacity, and Munster expects that a sapphire screen could push that figure to 30 percent. But there are still conflicting reports as to whether any of the iPhone 6 models will feature a sapphire screen. Apple has reportedly amassed a sizable supply of the material, but some rumors suggest that the material could be intended just for the iWatch for the time being.
Regardless of whether Munster is proven correct on the particulars of each of Apple’s upcoming products, he is optimistic that Apple won’t disappoint consumers or investors with the products it unveils on September 9. He cites the “magnitude of the iPhone 6 and iWatch launches” as the rationale behind Piper Jaffray’s price target increase for Apple.
And whether his projections are exactly aligned with other industry reports or not, Munster seems to join the rest of the tech community in the belief that Apple’s announcements on Tuesday — to be made at the same venue where Steve Jobs unveiled the original Mac computer 30 years ago – will be its most important in several years.