Four Things Apple (AAPL) Analyst Toni Sacconaghi Is Looking for Tomorrow
Bernstein's crack Apple (NASDAQ: AAPL) analyst Toni Sacconaghi highlighted four things they are watching for at tomorrow's event at 10am PT/1pm ET.
The views are on top of the widely held belief that Apple will introduce a new iPhone that include Force Touch display, higher-pixel front-and-back-facing cameras, a faster A9 processor, faster LTE capabilities, a RAM upgrade to 2GB, and a rose gold color option. In addition, the company is expected to announce a new and improved Apple TV with more computing power, and an ability to run developer written apps, a new line of Watch bands, and a larger 12.9" iPad, which many dub the "iPad Pro".
1. How – if at all – might Apple choose to address more price conscious segments of the smartphone market? The analyst said Apple could 1) introduce a new lower-priced product, 2) continue selling phones from two generations ago, or 3) simply drop the price of iPhone 6 and rely on elasticity?
2. Will new iPhones pressure margins due to pricier components? Sacconaghi highlights that: (1) Margins have historically fared well in "S cycles", and component costs are declining, which is encouraging for margins in the 6S cycle; (2) Management likely would have warned us if they expected gross margin pressure…but they didn't; (3) While we see limited risk to iPhone GMs from increased product BOM, we encourage investors to focus on 1) iPhone generation mix, 2) storage capacity mix, and 3) currency.
3. How capable might an iPad "Pro" be and how might it be positioned? Converged offering, or large screen tablet? The analyst commented, "We asserted in 2011 that converged PC/tablet devices were inevitable, and revisited the idea in February this year. Ultimately, we believe that there is a segment of consumers who would prefer the convenience of owning one converged offering, instead of a separate tablet and notebook. Accordingly, widespread adoption of converged offerings could reduce the size of the collective PC + tablet markets, though it could be meaningfully accretive to a company like Apple if it were to develop a highly distinctive offering and could gain PC share."
4. Will Apple's next push into the living room provide clues on its streaming video content ambitions? Sacconaghi said perhaps more important than new Apple TV hardware is a potential read into Apple's video content ambitions. "While it is widely expected that Apple will *not* announce a streaming video service offering tomorrow, its Apple TV announcement could provide clues about what might be forthcoming," the analyst commented.
The firm maintained an Outperform rating and price target of $142 on AAPL.
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Shares of Apple closed at $109.27 yesterday.