Apple Inc. (Nasdaq: AAPL) stock didn’t join in the broad market rally this week after the stock received a rare downgrade from Maxim on Wednesday. Apple investors are anticipating good news from the company at June’s WWDC developer conference, but analysts say shareholders should keep their expectations in check.
Apple stock traded slightly lower after Maxim analyst Nehal Chokshi said Apple’s high-growth Services segment will not be able to pick up the slack from a saturated iPhone market.
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Chokshi says Apple’s subscription services, which include Apple Pay, Apple Music, iCloud and the App Store, may not have the level of peak attach rates among iPhone users that investors are hoping for. Attach rate is a business metric that represents the percentage of a secondary product that is sold as a direct result of the sale of a primary product, in this case the iPhone.
“Prior survey data indicates attach rates for subscription services will be at best 30 percent, likely lower, given ecosystem-centric approach, especially for services where entrenched incumbents exist,” Chokshi says.
Chokshi says he sees a “high risk” fiscal 2019 will be a “down year” for Apple given the smartphone market appears to be in decline.
The WWDC conference June 4-8 in San Jose, California, could provide an extremely important glimpse at Apple’s long-term Services trajectory, but GBH Insights head of technology research analyst Daniel Ives says investors shouldn’t expect any blockbuster hardware announcements.
“While there is an outside chance we can see a glimpse of the next iPhone SE 2 model and its 5.5 inch screen with some possible hints around the next redesigned Mac Pro, the major focus of WWDC will be around software updates rather than hardware releases with all developer eyes on the unveil of the much-anticipated iOS 12,” Ives says.
Ives says investors will likely have to wait until September to get their first glimpse of the next generation of iPhones. Ives is anticipating three new models this year: a 5.8-inch OLED model, a 6.5-inch OLED model and a lower-end LCD model.
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GBH Insights estimates there are roughly 350 million iPhones in use that are in need of an upgrade within the next 18 months.
Maxim has “hold” rating and $200 price target for Apple. GBH Insights has a “highly attractive” rating and $200 target for AAPL stock.
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What to Expect From the Apple Inc. (AAPL) WWDC Conference originally appeared on usnews.com
