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IPhone Takes Backseat at Apple's Developer Event

However, it remains central to our narrow moat rating.

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 Apple’s (AAPL) annual Worldwide Developers Conference introduced its typical slew of operating system updates across a bevy of devices. Our overall takeaway is that Apple used the event to refine the user experience for its existing devices, versus a single massive innovation or new product. Perhaps the most interesting feature was the iPadOS to better support the tablet experience, but on the whole most of the announcements seemed incremental in nature. Although none of the new features or products move the needle on our valuation assumptions for Apple, we do believe they collectively underscore the company’s services-driven growth engine and bolster the switching costs that support our narrow economic moat rating.

Although the iPhone wasn’t the focal point of the event, each product or service updated or referenced supports Apple’s crown jewel by keeping iOS users engaged with the ecosystem, which we think makes it less likely that a user will depart Apple’s walled garden. We are maintaining our $200 fair value estimate, and while the shares appear undervalued at current levels, we would wait for a wider margin of safety before investing, given the U.S.-China tensions weighing on the market.

Abhinav Davuluri does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.