Many Apple ( AAPL -1.17% ) investors are getting antsy. Shares still trade about 25% lower than their all-time high at $705 in September 2012. As shares continue to flounder just between $500 and $550, the S&P 500 soared 25% since Apple hit all-time highs. Further, growth on Apple's top line has slowed to single-digits and net profit growth has vanished entirely. While massive share repurchases and dividends help dampen the negative effects of Apple's slowing business growth, the company will eventually need to turn another industry on its head to get investors excited about the stock again.
Fortunately, it looks like investors won't have to wait much longer to see how well Apple can innovate in an entirely new product category. Apple CEO Tim Cook has said on multiple occasions in the past twelve months that it will launch new product categories in 2014. In a recent extended interview with The Wall Street Journal's Daisuke Wakabayashi, Cook reiterated that Apple is "Absolutely" working on new product categories for launch this year.
Depending on how you define "new categories," rumored products include a phablet, a 4K television, a mobile payments service, and an iWatch. While a larger iPhone that could qualify as a phablet is a likely product investors will see this year, the only major new product that is looking likely as of right now is an iWatch.
The best evidence that Apple is an iWatch for a 2014 launch is its recent rampant hiring of employees related to wearable devices. A Feb. 10 in-depth report from MobiHealthNews on Apple's plans for its iWatch said the team at Apple working on the iWatch has now grown to 200.
Prominent rumor-mill chatter suggests that the iWatch will use sapphire glass for the display, be equipped with iOS, serve as a peripheral device that works in conjunction with an iPhone, and track health-related metrics, similar to other health smartwatch devices on the market today.
A big enough category?
Considering that the wearables market today is incredibly small, it's tough to imagine an Apple-branded smartwatch significantly budging Apple's $174 billion top line. Canalys estimates that the "smart band" market will only grow to 45 million annual shipments by 2017 -- and that estimate includes the assumption that both Apple and Google get into the market. Considering that Apple alone sold 150 million iPhones in fiscal 2013, 45 million total smart band shipments annually three years from now doesn't sound like a very exciting market.
Of course many experts drastically underestimated the iPad, too. But with so little known about Apple's potential in the market, investors shouldn't add in iWatch assumptions to their thesis just yet.