Will WWDC Enhance Apple's (AAPL) Growth Prospects in 2018?

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Apple 's AAPL annual event Worldwide Developers Conference ("WWDC") is set to commence today.

Just like other years, the company has been tight-lipped about the event and surprisingly leaks are also scarce. It seems Apple's improved security measures to stop public outflow of its private data have worked perfectly this time.

Nevertheless, the buzz around the event is escalating as the kick off time draws near. Although chances of unveiling a new iPhone is quite unlikely, analysts and Apple enthusiasts have speculated the company to unveil "a cheaper Siri-integrated Speaker" (Gene Munster of Loup Ventures) or a "host of Mac upgrades" (Keybanc analyst).

Apple has also been rumored to launch a cheaper version of HomePod. Sales of this latest hardware, which Apple launched in February, have been unimpressive.

Per data from Strategy Analytics, HomePod garnered a mere 6% share of the market in the first quarter, trailing Amazon's AMZN Alexa-powered Echo, which used its first mover advantage to pick up a 47% share.

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Alphabet's GOOGL Google Home has also rapidly gained ground with a 27% share. Moreover, Alibaba BABA and Xiaomi are notable competitors in this space due to strong demand for their products in China.

WWDC: Essentially a Software-Oriented Event

Apple has been traditionally using the WWDC platform to unveil new iOS as well as improvements in its software and services offerings. This year also the company is expected to launch newer versions of iOS, macOS, watchOS, and tvOS.

Reportedly, Apple is now more focused on improving performance, efficiency, and quality of its existing software features. The new approach is anticipated to help the iPhone maker regain trust of its user base that faced significant headwinds with iOS 11, which was launched in September 2017.

Moreover, the controversy around slowing iPhones with an older battery due to software update have also dented Apple's transparent image. Consequently, it is expected that Apple will tread cautiously over upcoming software updates.

Apple is now anticipated to launch a not so feature-heavy iOS 12. Per Forbes, the focus will be on "stability and bug-catching, rather than any significant changes to the OS."

Apple is also rumored to make announcements regarding its Augmented Reality (AR) tools, streaming service (considering Apple's huge investment on original content), peer-to-peer payment (Apple Pay), data privacy tools and Digital Health.

Digital Health to Check Child Addiction

The Digital Health initiative is interesting, which according to Bloomberg, is a new setting feature that will include a series of tools aimed at showing people how they are using their iPhones and iPads. These tools will also show in detail how much time users are spending on their devices.

The Digital Health tool is expected to improve parental control over smartphone usage of children. Early this year, couple of shareholders - Jana Partners and the California State Teachers' Retirement System (CalSTRS) urged Apple to offer more tools to keep smartphone addiction in check among children.

Per Bloomberg, Apple, in response to the criticism, also mentioned that since 2008 iPhone and other Apple products running on iOS have been offering parents tools that enable them to control what their children can access. The company also offers an Ask to Buy feature that requires consent of parents to buy goods and services.

What WWDC Means to Apple Investors?

Per data from Nasdaq (as of June 2017), Apple's share price dropped nine out of 10 times in early June, over the 2007 to 2017 period, (except 2014). This reflects investor scepticism toward the WWDC event, which Apple hosts in the first or second week of June.

Nonetheless, the stock recovered eventually and returned almost 845.7% during the same 10-year period, significantly outperforming S&P 500's gain of 62.8%.

The outperformance can be attributed to the strong performance of iPhone along with gradual expansion of the company's services business that include revenues from Internet Services, App store, Apple Music, AppleCare, Apple Pay, and licensing and other services.

We expect WWDC 2018 to provide more visibility into Apple's software and services strategy, as its ecosystem continues to expand. Services are anticipated to become Apple's next long-term growth catalyst, as iPhone sales slows down.

Apple's focus on providing superior software is expected to sustain stickiness of its user-base irrespective of a particular device in the long haul. The Zacks Consensus Estimate for long-term earnings growth rate is currently pegged at 11.77%.

Notably, the trend in Apple's share price is positive this year, which increased 1.8% to close at $190.24, near its 52-week range on Jun 1. Apple shares have returned 12.4% year to date, outperforming S&P 500's increase of 2.3%.

Currently, Apple carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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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.

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