“Apple could have a leg up on Alphabet’s Google’s Android platform, given that the Apple iOS software is not as fragmented as Google’s Android is, says Morgan Stanley analyst Katy Huberty in a mammoth research note on augmented reality as the next big thing in smartphones,” Tiernan Ray reports for Barron’s. “Augmented Reality may boost Apple’s services and software revenue by $9 billion over the next three years, opines Huberty.”
We believe ARKit completes the Apple software and hardware ecosystem and gives Apple a significant first mover advantage. With the launch of ARKit, Apple now controls both the hardware upon which AR applications can be run and the software platform for which the third-party applications can be created. As a result, we expect much more widespread adoption of AR on the iOS system vs. Google Tango and ARCore (at first) as developers realize the poten- tial for broad distribution across the iOS platform.
Historically, the introduction of new technologies such as LTE and larger screen smartphones drove an acceleration in the growth of Apple Services revenue as well as the broader services industry. We believe AR can drive a similar acceleration, resulting in Apple Services revenue growth accelerating to 31% Y/Y in 2019, from 19% in 2018, relative to our base case estimate of 19% growth Y/Y. This translates to incremental Apple App Store revenue of $8.6B over the next three years. While we recognize the benefit to Apple is small relative to the company’s overall revenue base, the incremental margin is near 100%, helping drive a more meaningful EPS impact of over $1/share over the three year period. — Morgan Stanley analyst Katy Huberty
Much more in the full article here.
MacDailyNews Take: Google doesn’t have a leg to stand on in the Augmented Reality race.
Android phone/tablet peddlers simply cannot match Apple’s integrated approach where custom hardware complements custom software and vice versa.
I do like her “bull-case price target of $253”
Took her long enough to finally figure out Apple’s potential. Back in the day, and for the longest time, she was always fairly negative about Apple, as I recall. Nice to see she has changed her mind.