Apple, Inc.'s iWatch Could Revolutionize the Wearables Category

With Apple (NASDAQ: AAPL  ) unveiling its HealthKit during its 2014 Worldwide Developers Conference, it's becoming increasingly clear that Apple is likely hard at work on its own wearable device. With a likely launch nearing, Apple investors may want to begin thinking about the device's potential.

From HealthKit to iWatch
HealthKit is the biggest clue yet from Apple that the company is planning to launch an iWatch this year. HealthKit will serve as a tool for developers, allowing health and fitness apps to work together. It creates a centralized location for the key metrics -- like heart rate and calories burned -- that smart devices (akin to the rumored iWatch) collect.

HealthKit. Image source: Apple.

"The new Health app puts that data in one place, accessible with a tap, giving you a clear and current overview of your health," Apple says on its website. 

And it just so happens that the timing of an iOS 8 launch, with HealthKit built in, is likely to fall around the rumored timeframe for Apple's iWatch launch. Re/code's well-connected John Paczkowski said last week that Apple plans to launch a "wearable device" that capitalizes on HealthKit in October. That's just one month after Apple's usual iPhone launch and the same month Apple announced its new iPad and Mac lineups last year.

Apple's iWatch -- or some sort of wearable device -- is almost certain at this point.

Will it be a blockbuster product?
Apple apparently thinks so, according to Nikkei Asian Review, Apple is so confident in this new wearable device that it is planning to produce as many as three to five million units per month. That translates to 36 to 60 million in annual unit sales if the company's sales reflect that level of monthly production for twelve months.

That's a massive number. Consider that Apple only sold 19.5 million iPads in its first year of availability. Further, thirty six million Apple wearable devices would be more than half of the current annualized iPad sales. In the past twelve months, Apple only sold 71.8 million iPads.

If Apple is planning such impressive levels of production, the company may likely be poised to completely revolutionize the category for smartwatch devices. In 2013, there were only an estimated 500,000 smartwatches shipped. Production of 3 to 5 million would put 2013's sales to shame. Even estimates for the category's future potential could prove to be conservative. Unit sales of smartwatches are estimated to reach eight million in 2014 and 23 million in 2015, according to Canalys (based on the assumption that Apple does launch a smartwatch in 2014). If Apple's optimism about its iWatch is true, Canalys -- and many others -- may be drastically underestimating Apple's role in catalyzing the category.

Of course, basing a sales estimate on a report from Nikkei about Apple's plans for monthly production is undoubtedly speculative in nature -- even if Nikkei's sources are familiar with Apple's plans.

But given Apple's conservative valuation, even a slight success in the iWatch may provide upside opportunity for investors over the long haul.

What do you think? Is Apple's likely launch of a wearable device going to be a bigger deal than investors realize?

An investment opportunity stemming from the wearables revolution
Apple recently recruited a secret-development "dream team" to guarantee that its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are even claiming that its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts that 485 million of these devices will be sold per year. But one small company makes this gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and to see Apple's newest smart gizmo, just click here!


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  • Report this Comment On June 09, 2014, at 10:01 PM, twolf2919 wrote:

    What is the initial market for an iWatch? Well, suppose Apple sells 60 million iPhone 6 in its first quarter (not far-fetched, given hat it sold 51 million iPhone 5s in that device's first quarter). Add to this all iPhones sold, from the iPhone 4s onward (the first phone with Bluetooth LE, a prerequisite for iWatch-to-iPhone communication) - that's about 370 million. So the total initial market for this companion device is about 430 million. If 10% of this market purchase an iWatch when it comes out, Apple could be selling 43 million iWatches in the first quarter of availability!

    For sure, I mostly pulled the 10% figure out of my a$$ (I vaguely remember iPhone's smartphone penetration in China being around 10% - no relationship, but I needed a figure :-) But it's as good as anyone's guess.

  • Report this Comment On June 09, 2014, at 10:32 PM, TMFDanielSparks wrote:

    @twolf2919,

    Great way to think about it!

  • Report this Comment On June 10, 2014, at 9:40 AM, twolf2919 wrote:

    @aaplgeek,

    In my experience Apple devices don't drop drastically when new devices come out (some, but nothing drastic). I'm a big fan of amazon's trade-in program - because they have decent prices and, more important to me, it's absolutely hassle/worry free. Just send it in free of charge (just print out the provided UPS label) and get a credit to your amazon account. I've sold two iPads and an iPhone there.

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