KeyBanc: Apple Watch Has 'Strong' Initial Demand, Poses Risk To Fashion Watches

In a new report, analysts at KeyBanc provided an update to Apple Inc. AAPL shareholders on the Apple Watch, including their take on presale numbers and market expectations. Analysts also discussed the impact that the Apple Watch will have on the fashion watch space.

Disruptive To Traditional Watch Market

Analysts believe that the Apple Watch will be “highly disruptive” to the fashion watch market. Regardless of the long term success of the Apple Watch, it will likely bring the watch market to a grinding halt in the short-term as competitors watch and see how the story plays out.

Analysts see a material impact on Fossil Group Inc FOSL and Movado Group Inc MOV and have lowered their 2015 earnings estimates accordingly.

Related Link: Are Pundits Wrong About Apple Watch Demand?

High Expectations

According to the report, consensus investor expectations for the Apple Watch are for sales of about 20 million units in 2015. According to analysts’ most recent supply checks, it appears as if Apple is ordering components for “well over” 20 million units for the year.

While this number of units represents only slightly more than 5 percent of the iPhone user base, it represents about half of the high-end watch market. Therefore, in order for the Apple Watch to meet expectations, it will either gain a 50 percent market share in the space, or expand it by 50 percent.

Outlook

Initial pre-sales of the Apple Watch have “vastly exceeded supply.” KeyBanc has a Sector Weight rating on Apple and Movado. It has an Underweight rating and a $75 target on Fossil.