Apple opens its Worldwide Developer Conference, known as WWDC, next week in San Francisco where the focus is expected to be on new software, not hardware. That’s a bit of a downer for investors, who tend to focus on the products that bring in the most money–especially the iPhone. But software improvements can drive hardware sales, too.
Apple’s stock price (AAPL) has rallied about 9% since reports last month that it was upping orders from Asian suppliers for its next iPhone. But at just under $99 on Friday, the stock price remains down 23% over the past year, as concerns about slowing iPhone sales overwhelmed all other issues. Analysts say Apple needs to add some impressive new features to the next iPhone to get sales growing again after the company posted its first ever year-over-year decline in phones sales at the beginning of 2016.
Two of Apple’s top services could see major improvements, according to analysts Andy Hargeaves at KeyBanc Capital Markets. Apple will likely improve its voice-driven digital assistant, Siri, to make it easier for third-party services to connect. Currently Siri can only connect with a few non-Apple apps, but competitors like Amazon’s Alexa and the upcoming Google Home assistant appear to have much broader ties to outsiders.
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“Amazon has somewhat surprisingly usurped leadership in voice assistance with Alexa and the Amazon Echo, in our view,” Hargeaves wrote in a recent report. “By expanding Siri to the Mac and adding an software developers kit (SDK), Apple should be able to step up its competitive position and increase the flow and variety of data through the Siri platform, which is critical to improving the product over time.”
Apple Pay, the small but fast-growing mobile payments service Apple announced almost two years ago, will likely add the ability to work on web sites for e-commerce and gain the ability to transfer money among users like PayPal’s Venmo app. Still, that won’t make much different to Apple’s financial results, according to Hargeaves.
“We continue to believe total revenue from the service will remain virtually unnoticeable in Apple’s income statement, and that the primary benefit is to reinforce the value of the ecosystem,” he writes.
Apple will also tout updates to all four of its various operating systems, Apple TV’s tvOS, iOS for mobile devices, Apple Watch’s watchOS, and the laptop and desktop computer’s Mac OS X, which may be renamed macOS, analyst Brian White at Drexel Hamilton notes.
“We expect Monday’s keynote to be a ‘soul-filled’ event with a focus on software and services that expand the reach of Apple’s digital matrix, while laying the foundation for exciting new innovations in the future,” he writes.
Apple might also have its sights set on Netflix. Watch:
Longtime Apple analyst Gene Munster at Piper Jaffray says he’s expecting mostly incremental upgrades “as a warm up to more meaningful announcements in the fall including iPhone 7 and an updated Apple Watch.”
Revealing new iOS features at WWDC that won’t arrive until the next iPhone hardware upgrades, likely in the fall, could provide clues about what hardware tweaks Apple plans for its flagship device, however, says Brian Donlin at Stifel Nicolaus.
“We do not expect explicit hardware details on the new iPhone,” Donlin writes. “However, details around new features of iOS 10 could be seen as a leading indicator and fuel speculation around new iPhone features and products.”
Still, some analysts expect Apple may have new hardware to announce as well, though not new iPhones. An improved Macbook Pro laptop is likely and an upgraded Apple watch device is possible but unlikely, according to Amit Daryanani at RBC Capital Markets.
But Daryanani doesn’t count any of the WWDC announcements as having a major impact on Apple’s stock price. That will be driven by new iPads and iPhones, a possible subscription TV service, and increases in stock buybacks and dividends, he writes.