Market Overview

What Everyone's Saying About The New Apple Watch

What Everyone's Saying About The New Apple Watch
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Apple Inc. (NASDAQ: AAPL) presented its new smartwatch on Wednesday: the Apple Watch Series 2. The new device, Chief Operating Officer Jeff Williams said, offers a suite of novel features, including the possibility to contact emergency services instantly, the integration of Nintendo Co., Ltd (ADR) (OTC: NTDOY)’s Pok√©mon Go, a built-in GPS and a “Swim Proof” exterior.

In addition, the company announced it would launch Nike+ running edition in October, in cooperation with Nike Inc (NYSE: NKE).

So, let’s take a look into analysts’ reactions to the new device, which, according to Apple CEO Tim Cook, only trails Rolex in global watches sales.

Analysts' Take

  • Goldman Sachs’ Simona Jankowski said the Watch was mostly consistent with expectations. The price, however, was $20 higher than anticipated.
  • Wells Fargo’s Maynard Um described the new Watch as a step up from its predecessor. The firm expects it to drive revenue of $3.8 billion.
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  • UBS’ Steven Milunovich noted that “the combination of iPhone 7 advances (camera, battery life, screen, wireless earbuds, stereo speakers, water proofing) and Apple Watch Series 2 sport capabilities keep offerings competitive until more differentiation arrives next year.” However, Apple needs a few more iterations to make the Watch a must-have, the analyst concluded.
  • Bernstein's Toni Sacconaghi pointed out that the new device boasts longer-term potential. The elevated price, "continued tepid" battery life and absence of a unique health monitoring capability will probably "limit its overall impact" in the near-term, he wrote.
  • Pacific Crest’s Andy Hargreaves stated that, while the substantial functional improvements should help increase demand, the do-it-all concept is still missing the mark. The analyst anticipates the added fitness functionality (GPS and 50-meter water resistance) will drive incremental demand, helping unit sales surpass the firm’s fiscal 2017 estimate of 9.7 million.

    "However, any upside is likely to be relatively modest at Apple's scale, as each 1 million units is approximately $0.02 to EPS in our model," the expert added. To capitalize on the wearables trend, Apple needs to expand the Watch category to include a broader selection of devices with more specific applications, and likely lower functionality, at inferior prices, he concluded.

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    Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned above.

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