Here’s Why the iWatch Is a Big Deal for Apple Investors

Is the iWatch the next big money-spinner for Apple?

Mar 18, 2014 at 7:30PM

After three long years of rumors, Apple (NASDAQ:AAPL) finally struck a deal with China Mobile (NYSE:CHL). Rumors of a cheaper iPhone started circulating more than two years before Apple finally launched the iPhone 5c. Now there's a new rumor, and when it materializes, it will have a bigger impact than the partnership with China Mobile or the iPhone 5c: the iWatch.

Rumors gathering pace
Speculation about the iWatch started gaining steam in early 2013, when both The New York Times and The Wall Street Journal reported that Apple is experimenting with iOS-based watches made of curved glass. The rumors became hotter when Bloomberg reportedthat Apple had hired several new wearable computing experts to work on such a device. With 2014 well under way, that team is believed to have grown to at least 200 people, according to MobiHealthNews' Brian Dolan.

The acquisition of Passif Semiconductor, a chipmaker developing radios for low-power Bluetooth, further fueled the story. Passif developed the low-power Bluetooth, or Bluetooth SMART, with embedded and wearable computing applications in mind, and the acquisition suggests that Apple is working robustly to bring out the iWatch as soon as possible.

Reports suggest that the iWatch may come with optical sensors to measure heart rate and oxygen levels, and will have various other medical applications. This speculation was fueled by the fact that Apple had recently published a job listing on its career site.

Apple hasn't confirmed the launch of the iWatch, but there are a number of sources indicating that it will happen within a year or two. Moreover, Tim Cook confirmed Apple's plan to launch products in "new categories" this year. Note that he used the term "categories," which indicates that Apple will be entering into at least two new markets. And at the moment, there are only two rumors -- the iWatch and a TV -- that are extensively talked about.

Why should investors care?
Investors tend to underestimate the potential of Apple's new categories. However, the iWatch has the potential to be a massive growth driver for Apple. Morgan Stanley projects that the iWatch will generate a whopping $17.5 billion in revenue in the first 12 months it's on the market. This is more than what the iPhone, at $2.5 billion, and the iPad, at $13 billion, generated in their first 12 months on the shelves, combined.


Morgan Stanley based this estimate on the fact that each new Apple product has sold faster than the product that came before it. The firm expects the iWatch to sell faster than the iPad, unless Apple suffers from supply constraints, which could bring revenue down to $12 billion. At first glance, the target may seem too high, but it is achievable and here's why.

High-margin sales
Everyone knows Apple loves the "High Price, High Margin" strategy. Morgan Stanley predicts that the iWatch will have a price tag of $299, which is $100 more than Sony's SmartWatch. However, since Apple has a very loyal user base, it can increase prices further without having any negative impact on the sales. Moreover, both Sony and Samsung have failed to impress gadget enthusiasts with their own versions of smart watches, and this gives Apple the opportunity to capture this market.

Sales of iPhones
The primary feature of a smart watch is that it integrates with your phone and is compatible with the operating system. So, it's certain that the iWatch will be compatible with the latest version of iOS, and sales of the iPhone will have a direct impact on sales of the iWatch. Apple nearly sold 34 million iPhones in the fourth quarter of 2013 and is constantly working to increase that number.

Analysts estimate that the deal with China Mobile will help Apple sell an additional 20 million phones in China, and the company is looking to sign on 50 new carriers for the iPhone, as per WSJ. These initiatives will drive up iPhone sales and will have a positive impact on iWatch sales when it hits the market.

The takeaway
The iWatch looks set to become Apple's next big product. The company has been criticized over its seeming lack of new, revolutionary products, but it looks set to break that image with an  iWatch. The market for smart watches is huge, and Apple is ready to attack this with its own version of the device. The company has historically done well with new launches and it won't come as a big surprise if it manages to do the same when it launches the so-called iWatch.

Want to get out in front of a wearable Apple device?
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.

Mukesh Baghel has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and China Mobile. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers