Nomura Sees Possible Apple (AAPL) Beta Launch of iWatch at WWDC

Nomura Securities analyst Stuart Jeffrey commented on what to expect from Apple (NASDAQ: AAPL) at WWDC and raised his price target to $621.00 (from $574.00). The analyst maintained a Neutral rating.

Jeffrey expects Apple to focus on three key themes at WWDC:

• Wearables – with a possible beta launch of an iWatch
• Convergence of iOS and Mac OS X – primarily focused on OS X
• New services – such as music streaming and home automation

On wearables, Jeffrey said, "We believe that Apple may release details of its wearables platform, including new APIs for developers, as well as perhaps a beta-type launch of a smart watch / iWatch. This may open up a new product category for Apple and so drive possible earnings upside. Our analysis, however, suggests that it might prove hard for an iWatch to boost revenues by more than 2% in FY15."

On convergence of iOS and Mac OS X, he said: "We expect OS X changes to drive greater convergence with iOS, from a user experience perspective rather than a Windows 8 style integration. With Mac sales accounting for less than 13% of revenue (less of gross margin), this is a positive step but likely not that EPS sensitive. While iOS 8 should see smaller changes relative to iOS 7, we do expect iOS 8 to enable single screen support for multiple apps, which we believe will moderately help iPad sales. We doubt that iOS 8 will allow iPads to become full laptop replacements though."

On new services, Jeffrey said, "We expect Apple to detail some of its plans for Beats and to outline some of its thoughts around the Internet of Everything through solutions such as home automation. We believe Apple is well placed to act as a catalyst for many of these new services but continue to see them as solutions to sustain Apple’s hardware sales rather than as new earnings streams in their own right."

The analyst sees near-term upside in the stock to the mid $600s on multiple expansion in anticipation of new product launches later this year but said 2015 outlook appears tougher.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $635.38 yesterday.

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