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Piper Jaffray analyst Gene Munster on Apple's battery, AR, VR and automobile prospects

Aug. 19, 2016 2:19 PM ETApple Inc. (AAPL) StockAAPLBy: Eric McCaffrey, SA News Editor20 Comments
  • Batteries: "We believe that in the next three years, the area where Apple can make the most impactful improvement is in battery life. While batteries aren’t as exciting technologically as retina scanning or curved glass, we believe that functional improvements tend to drive the most consumer excitement and interest. For example, adding 3G to the iPhone 3G and the larger screen sizes for the iPhone 6 have been two of the biggest points of acceleration in the life of the phone."
  • Augmented reality: "More specifically, this could include additional camera features to pull in image based information and additional sensors to enable new interactions with the real world. AR enhancements on the iPhone could also come through enhanced software. Cook also spent time on the last earnings call highlighting the company’s work in artificial intelligence, including that much of Apple’s AI processing happens on the device instead of in the cloud. We believe that Apple could introduce new AR features enabled by its AI software also related to processing and predicting events and locations around the user in real-time. While we don’t expect AR- related features to drive an inflection in iPhone growth, we do see them as an important evolution in the device as we move beyond the smartphone. Long-term (beginning more meaningfully in 5-10 years), we continue to expect that some form of wearable, most likely in the form of glasses, will replace the majority of screens in our everyday lives. These wearables, and eventually contact lens or implant-based devices, will likely be the future of augmented reality hardware. We continue to expect that Apple will have a dedicated AR/MR product in the 2021-2025 timeframe."
  • Virtual reality: "We continue to believe that Apple will open up the iPhone for third-party VR hardware companies to make authorized headsets by 2018; however, it’s hard to see Apple developing a computer-powered high-end headset in the current market. Beyond the next few years, 10 years and beyond, we believe that all-in-one VR headsets will enable new experiences that replace how we use PCs and TVs today. We believe that those types of headsets could be more interested for Apple given that they are likely to be in the $500-1,500 ASP range vs smartphone-powered headsets at $100."
  • Automobile: "Initial WSJ reports suggested that the car had a “target ship date” of 2019; however, more recent reports suggest the launch is more likely in 2021 or five years from now. We believe that Apple could release some of its learnings before 2021 as it continues to develop its own car. For example, autonomous driving software could come out earlier via an automotive partner or more advanced CarPlay features. In terms of the market, as we’ve previously written, BMW might be the best comp for what Apple could do with the car in a wildly successful long-term scenario. BMW brand sold 1.9 million vehicles worldwide in 2015. At a $75k ASP, that would represent a $142.5 billion revenue opportunity. The bottom line is that the car, while it could still be scrapped, has the potential to be a true needle mover."
  • Munster maintains a $151 price target (current price $109.30) and Overweight rating on Apple (AAPL +0.2%).
  • [Barron's]

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