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Apple (NASDAQ:AAPL) is set to kick off its annual developers conference on Monday with a keynote address that is perhaps the tech giant’s most widely anticipated speech since the iPhone was introduced nearly 17 years ago.
“In a nutshell, [the Worldwide Developers Conference] is a pivotal moment in Apple’s future as the developers are the hearts and lungs of the Cupertino growth story and will now start a new AI driven chapter in the Apple growth story for the coming years,” Wedbush Securities analyst Dan Ives wrote recently. Ives has an Outperform rating and $275 price target on Apple.
And while the event isn’t usually a catalyst for the stock, the fact the event is likely to focus on Apple’s generative artificial intelligence plans could prove significant for investors.
What’s expected: AI leads the way
Apple is expected to unveil numerous updates to its various operating systems. Yet, three announcements are likely to stand out from the rest, Morgan Stanley analyst Erik Woodring said, including a new upgraded version of Siri.
An upgraded Siri, with new capabilities and the ability to be integrated into apps would “formally enter Apple into the mega-cap Gen AI race,” Woodring added.
The other major expected announcements include Apple’s partnership with generative AI darling OpenAI and its ability to run generative AI commands on the iPhone itself and not in the cloud.
“Combined, these factors can help to sustain Apple’s recent outperformance beyond WWDC, and we remain OW-rated with a $216 PT/$270 bull case valuation,” Woodring wrote in an investor note.
Aside from these three, Apple is also expected to show off a slew of new generative AI features, such as the Mail app providing auto replies; messages also getting auto replies; an updated version of its Xcode programming software; AI created emoji; AI infused photos; and much more.
Apple’s Safari web browser is also expected to get a dose of AI, letting users read quick recaps of websites and summarize articles.
This summary feature is also expected to come to messages, email and notifications.
While the AI features Apple is expected to introduce may put it on par with its big tech brethren, there is real financial value to them.
Ives calculates they add between $30 and $40 per share to Apple’s value. Woodring suggested that if Apple introduced an AI-subscription service at $5 per month, it could add between $4B and $8B in annual recurring services revenue.
What else is coming besides AI?
Aside from sprinkling AI all over its various operating systems, Apple is expected to make several other changes as well.
These include a new Password app for iOS, iPadOS and macOS, designed to make signing in to places easier.
Improvements to its Health app, the calculator, its Settings app and calendar app are also expected.
What’s not expected?
New hardware.
Cupertino, Calif.-based Apple used last year’s developer conference to introduce its Vision Pro mixed-reality headset, but it is not expected to unveil any new hardware this go around.
Apple announced new iPad tablets and accessories (as well as the new M4 chip) last month and has refreshed the vast majority of its Mac lineup. In October 2023, Apple held a surprise event to unveil new MacBook Pro laptops and a new iMac. In March, it introduced two new models of the MacBook Air.
Not mentioned yet, of course, is the iPhone, which accounts for more than half of Apple’s revenue.
It’s no secret that sales of the iPhone have struggled in recent quarters, and the company and its partners have used discounts to spur growth. However, the introduction of AI into its biggest seller could spur significant upgrades.
“We expect Apple to leverage WWDC to introduce new, Gen AI-enabled software upgrades … that will catalyze iPhone refreshes later this fall, helping to accelerate iPhone replacement cycles, drive a return to Y/Y unit growth for the first time since FY22 and extend the 9 points of stock outperformance Apple has seen since F2Q earnings,” Woodring wrote.
