Though Apple's (AAPL) big developer conference didn't have any "wow" moments, investors are likely to see continued gains as new hardware is launched later this year.
Announcements such as Apple Music, proactive search with Siri, Apple Pay rewards and updates to iOS, OS X and watchOS are all likely to help boost iPhone, iPad, Mac and Apple Watch sales as new features get added. These will help bring new people into the Apple ecosystem, allowing Apple to continue innovating and adding new features.
"With these announcements, Apple continues to demonstrate how its integration across hardware, software and services based on iPhone, iPad, Mac and Apple Watch could result in a sustainable differentiating advantage over rival platforms," Credit Suisse analyst Kulbinder Garcha wrote in a research note. "This creates a virtuous circle for its business lines: high levels of usage and differentiation allows more devices to be plugged into the platform."
Garcha rates shares outperform with a $145 price target.
Apple doesn't get a lot of attention for its software and services due to mishaps in the past. Siri was initially chastised for being wrong and giving errors much of the time, while Apple Maps was initially deemed a failure, because of inaccurate directions.
However, over time Apple Maps (which received a big upgrade yesterday) and Siri have greatly improved, making these services vital to Apple, even if there's currently little money to be had from them.
"We believe Apple's digital ecosystem is often under appreciated, operating in the shadow of the company's mobile device portfolio," Cantor Fitzgerald analyst Brian White wrote in a note.
Even though Apple generated $58 billion in revenue last quarter, just $5 billion came from software and services. Apple Music, which is slated to launch next month for $9.99 a month, may help boost that $5 billion figure, as potentially millions of iPhone users around the world switch from competing services, including Spotify.
Broadly speaking, we think Apple needed to offer a subscription music service, and the company is providing a compelling services portfolio," BMO Capital Markets analyst Keith Bachman wrote in a note. "Further we think Apple will benefit from a large client installed base and brand name."
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
