Apple's iPhone 6 and Apple Watch: What Wall Street's Saying

NEW YORK (TheStreet) -- Tech enthusiasts were abuzz following Apple's (APPL) well-telegraphed product launch on Tuesday, in which the Cupertino, Calif.-based company released its newest iPhone versions -- the iPhone 6 and iPhone 6 Plus. Apple also demonstrated its newest product and move into the wearable technology space, the Apple Watch, and its mobile payments system, Apple Pay.

Watch the video below to get a closer look at Apple's newest products:

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Both phones will be available for pre-order on Sept. 12, with a full rollout on Sept. 19. The iPhone 6 will start at $199 with a two-year contract, while the 6 Plus will start at $299. CEO Tim Cook also unveiled Apple's smart watch, priced at $349, that will be available in "early 2015."

Apple's mobile payments service will work with the big credit card networks -- American Express (AXP) , Visa (V) and MasterCard (MA) , as well as the big banks, including Citigroup C, JPMorgan Chase (JPM) , Capital One (COF) , Wells Fargo (WFC) , and Bank of America (BAC) . Already Apple has signed up a slew of retailers, including Macy's (M) , Target (TGT) , Walgreens (WAG) and Starbucks (SBUX) , among others.

Read More: Apple iPhone 6 Live Blog Recap

Apple shares rose 9 cents to $98.08 in early trading on Wednesday. Here's what Wall Street analysts are saying about Apple.

Andy Hargreaves, Pacific Crest Securities (Downgrade from Outperform to Sector Perform)

We were impressed by the new iPhone 6 and 6 Plus, but believe the potential from these devices is largely priced into AAPL at current levels. Further, we believe sales to new iPhone users will decline beyond the iPhone 6, which is likely to prevent iPhone unit growth in F2016 and beyond. We believe anticipation of stagnant iPhone growth will drive multiple compression through F2015 as the iPhone 6 cycle progresses. Even if we stretch our estimate for F2015 iPhone units, the likelihood for multiple compression over that time suggests the majority of potential upside from iPhone 6 is priced into the shares.

Apple Watch is attractive, but the need for phone tethering, short battery life, and lack of compelling features for people who do not want a watch will limit the market, in our view. We are adding 30 million Apple Watch units in C2015, which drives our F2015 EPS estimate to $7.96 from $7.58 and drives our F2016 EPS estimate to $7.88 from $7.29. However, we do not see potential for significant upside to this estimate. We believe Apple Pay adds to the stickiness of the ecosystem, but we do not expect the service to add material profit.

Read More: Why Apple Pay Is So Important to Apple's Future

Keith Bachman, BMO Capital Markets (Outperform; $106 PT)

We continue to believe that the larger screen size iPhones will be well received by the market, and we think Apple will benefit from a strong, multi-quarter upgrade cycle. We are not changing our estimates, but we came away from the event with a higher conviction on our iPhone unit forecasts. For the Apple Watch, we were impressed by the design, user interface, and features, though pricing was modestly higher than we initially thought. While missing the holiday season is unfortunate, we believe the Watch availability keeps investors in the shares by creating a pending product launch. Finally, we believe that Apple Pay is a feature that should help sell Apple products and provide some small help to the bottom line. Apple is initially focused on payments, but we think that Apple will do more with the mobile wallet longer term.

Alex Gauna, JMP Securities (Market Outperform; $135 PT)

In our view, it was a solid day of technology advances for Apple, but it fell short of being pivotal with shortcomings including the Apple Watch missing the holiday season, no surprises on the Apple TV front, and no other evident blowout hardware features. While we would have liked to have seen a more impressive day for Apple that included some positive surprises; however, we believe the company is executing reasonably well and we reiterate our FY15/16 EPS estimates of $7.85/$8.95 (Street $7.06/$7.89) and our $135 price target, based on a 15x PE/FY16E multiple that we view as appropriate relative to the company's re-accelerating growth prospects.

Jim Suva, Citigroup (Buy; $110 PT)

Our Asia trip in August suggested a few variables in the supply chain that are shifting. We feel investors should be aware of this as it might cause some volatility in Apple stock. First, the smaller 4.7-inch version of the iPhone 6 appears to be on track for a late-September high-volume launch, while the high volume launch of the larger 5.5-inch version of the iPhone 6 has likely shifted to later in 2014, due to ramping yield challenges in the supply chain (display challenges). While Apple announced both versions of iPhone 6 and 6 plus to be available September 19th, we expect limited volumes of the 6 plus.

This is important because expectations may need to move lower in the months ahead as consensus sell-side expectations are for 70mn-80mn and buy-side expectations closer to 80mn-90mn (down from expectations 3-6 months' ago of 80mn-100mn, with supply chain build plans ranging from 80mn-120mn pre-yield plans) and we would not be surprised to see more media and news reports on these topics in the weeks ahead. We are expecting 15mn units in September and 45mn units in the December quarter for a total of 60mn iPhone 6 sell-through units in 2014, numbers we remain confident with. Our scenario analysis reveals each 1mn of iPhone 6 units results in an EPS impact of $0.03-$0.04.

Read More: 10 Best Apple Products Ever

Steven Milunovich, UBS (Buy; $115 PT)

Raising estimates mostly on better than expected Apple Watch pricing. We have revised our estimates to incorporate a new iPhone storage mix, a push-out of the Apple Watch to early next year, better-than-expected Apple Watch pricing, and a more cautious view on longer-term iPad unit growth. Our F15-16 net revisions are positive with revenue 2% higher to $212bn in F15 and a 1.5% increase to $227bn in F16 - despite a 10% decline in our iPad revenue forecast to $30bn. Our F15 EPS increases from $7.50 to $7.80 and F16 from $8.33 to $8.75. Including a 4-5% stock repurchase yield, we now project 23% EPS growth in F15 and 13% in F16.

Bill Shope, Goldman Sachs (Buy; $115 PT)

We found the technological advances put on display to be encouraging, and near-term, the iPhone refresh was by far the most impactful announcement for Apple's bottom line. We view the announced payments service as an important platform enhancement even though material monetization is unlikely in the near term, and it could provide an important, high-margin revenue stream longer term; in addition, Apple Watch was surprisingly innovative, though we do not expect it will be a game changer for the financial model. We are raising our estimates to reflect higher margin assumptions given the exclusion of a sapphire screen from iPhone 6 and iPhone 6 Plus and the introduction of Apple Watch into our forecast: FY2015/FY2016 EPS estimates increase to $7.67/$9.19 from $7.57/$9.12 previously, with FY2014 unchanged.

TheStreet Ratings team rates APPLE INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate APPLE INC (AAPL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and solid stock price performance. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.3%. Since the same quarter one year prior, revenues slightly increased by 6.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although AAPL's debt-to-equity ratio of 0.26 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.18, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Computers & Peripherals industry and the overall market, APPLE INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • 44.56% is the gross profit margin for APPLE INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 20.69% is above that of the industry average.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 37.72% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, AAPL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

Read More: Why Apple Is a Buy Because of Mobile Payments

-- Written by Laurie Kulikowski in New York.

Follow @LKulikowski

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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