Apple Watch will be 'digital sixth sense' for users & 'key catalyst' for shares of AAPL, UBS says

Posted:
in Apple Watch edited April 2015
While investment firm UBS doesn't believe the Apple Watch is yet a "must have" device, its importance to the company's bottom line is expected to grow over time as new use cases emerge.




Analyst Steven Milunovich issued a note to investors on Friday in which he said he is "moderately positive" on the Apple Watch in the near-term, but bullish on the wrist-worn device's long-term prospects.

He noted that the initial strength of the Apple Watch is saving time for users. But the killer feature may be the Taptic Engine which gives a gentle tap on the wrist.

To Milunovich, Apple's Taptic Engine could prove to be a so-called "digital sixth sense" for Apple Watch wearers. This capability, he said, could act as a bridge between the digital and physical worlds.

Also on Friday, the analyst introduced the new UBS Evidence Lab Apple Watch Monitor, which is designed to predict quarterly demand based on search popularity. The research found that consumer interest of the Apple Watch is about one-half that of the iPhone.




UBS has predicted that Apple will sell 16 million Apple Watch units through the end of fiscal year 2015, which concludes with the September quarter. Looking on to fiscal 2016, he believes Apple will sell 40 million units.

His forecast also calls for 15 percent earnings per share growth in fiscal 2016, with the Apple Watch contributing about a third of that. He sees the Watch becoming a meaningful part of Apple's growth story, potentially in the face of slowing iPhone momentum during an "s" upgrade cycle.

But Milunovich also cautioned that the figures may be too "aggressive," given the initial readings from the UBS monitor.

"But given the power of the Apple brand, it is premature to come to forecast conclusions," he said.

UBS has maintained its price target of $150 for shares of AAPL, with a "buy" recommendation for investors.
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Comments

  • Reply 1 of 53

    Personally I think the 6S sales are going to surprise. As has been noted, a huge number of 6 buyers are new to iPhone; there's a ton of people yet to upgrade.

  • Reply 2 of 53
    jfc1138jfc1138 Posts: 3,090member

    Another catalyst for Apple Watch sales is the current trend to larger iPhones: all of a sudden a casual phone check involves a much larger, in ways more cumbersome, device, opening a slot for the Apple Watch, especially with the 6 Plus.

     

    Apple (Cook?) noted a similar sentiment in mentioning the Watch as an effort to give people a bit of distance from their iPhones or something to that effect.

  • Reply 3 of 53
    xixoxixo Posts: 430member
    Personally I think the 6S sales are going to surprise. As has been noted, a huge number of 6 buyers are new to iPhone; there's a ton of people yet to upgrade.

    One article I saw said that at the end of 2014 only 10% of iPhone users had upgraded to the iPhone 6/6+

    And, apple will sell every watch they make, with the usual 30%+ margins

    Well on their way to trillion dollar valuation
  • Reply 4 of 53
    I have to wonder what the ponderously bureaucratic FDA, whose approval is required for medical use products and meds, among other things, has to do with the more limited utility of the Apple Watch at this initial stage. My guess is that the range of apps and enhanced functionality, that may already be built into the watch, will not be known for some time!
  • Reply 5 of 53
    dasanman69dasanman69 Posts: 13,001member
    Personally I think the 6S sales are going to surprise. As has been noted, a huge number of 6 buyers are new to iPhone; there's a ton of people yet to upgrade.

    The question is how many current iPhone 6 owners will upgrade to the 6s?
  • Reply 6 of 53
    dr millmossdr millmoss Posts: 5,403member
    Quote:

    Originally Posted by David Garon View Post



    I have to wonder what the ponderously bureaucratic FDA, whose approval is required for medical use products and meds, among other things, has to do with the more limited utility of the Apple Watch at this initial stage. My guess is that the range of apps and enhanced functionality, that may already be built into the watch, will not be known for some time!



    Nothing, I would say. Apple Watch is not a medical device, and any predictions that it would be one were merely rumors and/or wishful thinking. For the time being at least, Apple will be happy to leave medical functionality to medical device-makers.

  • Reply 7 of 53
    Quote:
    Originally Posted by dasanman69 View Post





    The question is how many current iPhone 6 owners will upgrade to the 6s?



    I might. Typically I was on a 2 year upgrade but since AT&T has been pushing the payment system I opted for the 18 month own and 12 month upgrade. I won't say for sure but if there's something compelling I probably will. 

     

    I ordered the Apple Watch Sports today. Ships in June which I figure is perfect. I'm not really sure I want one but I figure by the time my gets ready to ship I'll know since it'll have been out a few months and I can see what's what.

  • Reply 8 of 53
    tmaytmay Posts: 5,417member
    Quote:

    Originally Posted by sog35 View Post

     

    I agree with this.

     

    The iPhone worked on two senses:  sight and sound.

     

    The Watch is adding touch.

     

    The future begins April 24th.  Those who don't think wearables will eventually replace phones are living in a cave.

     

    When devices have direct access to our brain they will be able to add taste and smell.

     

     

    Don't underestimate the power of touch.  Can you imagine how insain high school kids would be if their favorite celebrity gave them a 'tap' message instead of just a twitter mention?


    Wearables aren't going to replace phones.

     

    I live in a cave.

     

    Wearables may replace phones of some or many users, given time, but it will be a very long time before the phone format is dead.

  • Reply 9 of 53
    drewsdrews Posts: 2member
    He noted that the initial strength of the Apple Watch is saving time for users. But the killer feature may be the Taptic Engine which gives a gentle tap on the wrist.

    To Milunovich, Apple's Taptic Engine could prove to be a so-called "digital sixth sense" for Apple Watch wearers. This capability, he said, could act as a bridge between the digital and physical worlds.

    I'm thinking that there will be a strong enrollment in Morse Code courses.
  • Reply 10 of 53
    quinneyquinney Posts: 2,528member
    Meanwhile, the Raymond James firm downgraded AAPL from outperform to market perform.
  • Reply 11 of 53
    Quote:

    Originally Posted by tmay View Post

     

    Wearables aren't going to replace phones.

     

    I live in a cave.

     

    Wearables may replace phones of some or many users, given time, but it will be a very long time before the phone format is dead.




    In my cave the iPhone and Hamilton Auto work just fine.

  • Reply 12 of 53
    radarthekatradarthekat Posts: 3,394moderator

    Apple Watch as Changing Paradigm

     

    The Apple watch will disrupt by changing the expectation of what a wrist mounted accessory should be.

     


    The Watch will deliver four key use cases well suited to a wearable device:



    1. Notification and dispatch. This is what everyone has been talking about so I won't detail this use case.

     


    2. Simple [lightweight] communications. For many, the concept of a smartphone as a phone (a real-time voice communicator) is becoming an anachronism. Many people use real-time voice communications only for short exchanges, to arrange a meetup or a quick check-in. These types of communications can easily be handled by the Watch, with longer conversations left to the smartphone. Apple's clever taptic communications (reach out and touch someone or send your heartbeat), the quick drawing app, and voice texts, all are lightweight forms of communication best suited for a wearable.



    3. Simple actions. With the introduction of HomeKit, and with ApplePay and integration with the Internet of Things, watches will soon be expected to perform the functions of house keys, car keys, workplace access Fobs and swipe cards, credit cards, light switches, television and stereo remotes, heat and air conditioning controllers, security system controllers, garage door openers, printed airline tickets and other passes. Just as the smartphone replaced many stand-alone products, so too will the smart watch.



    4. Tracking. Not just fitness and health tracking, soon watches will be expected to be able to input simple data into applications. From SalesForce to Facebook to employee rating to project tracking, status updates that are easily input will become a fourth, stealth use case.

     

    It's not that the Apple Watch will change the way people perceive fashion. No, it's that the Apple Watch, and to a lesser extent, all smart watches, will change the perception of what a watch should do. And once that perception has changed, people will demand budget editions and luxury editions of that new paradigm. It's then, soon, that all traditional watchmakers must shift, partner, or find a new way to make a living.
  • Reply 13 of 53
    fallenjtfallenjt Posts: 4,034member
    Quote:

    Originally Posted by sog35 View Post

     

    Don't underestimate the power of touch. 


    Yep, I confirm with you on my ex-girl friends's behalf.

  • Reply 14 of 53
    fallenjtfallenjt Posts: 4,034member
    Quote:

    Originally Posted by quinney View Post



    Meanwhile, the Raymond James firm downgraded AAPL from outperform to market perform.

    Yup, that guy is pure idiot because he thinks Apple watch isn't INSANELY great. I commented on that blog too.

  • Reply 15 of 53
    jfc1138jfc1138 Posts: 3,090member
    Quote:

    Originally Posted by Dr Millmoss View Post

     



    Nothing, I would say. Apple Watch is not a medical device, and any predictions that it would be one were merely rumors and/or wishful thinking. For the time being at least, Apple will be happy to leave medical functionality to medical device-makers.




    The FDA took notice (and IIRC there were meetings between FDA and Apple on the subject reported).

    http://www.bloomberg.com/news/articles/2015-03-30/fda-taking-a-very-light-touch-on-regulating-the-apple-watch

  • Reply 16 of 53
    fallenjtfallenjt Posts: 4,034member

    Anyway, any of you would want to trade the smaller BLACK sport band come with your 38mm for a WHITE one, let me know. Well, each Sport comes with 2 bands of different sizes right?

  • Reply 17 of 53
    slurpyslurpy Posts: 5,317member
    People are REALLY under-estimating the significance of the Apple watch, and how it will solidify, enhance, and add a differentiator to Apple's ecosystem in so many ways, beyond just being another product. Wireless payments is just the tip of the iceberg, in terms of the "magic" this will bring to everyday scenarios. The Watch, by default, is already authenticated as long as it's been on your wrist, which is HUGE. This paradigm is impossible for a phone, since there is no way of knowing if you are using it or someone else.

    Unfortunately, most people (as well as reviewers) lack the imagination to see this potential, unless it is demonstrated in their faces.
  • Reply 18 of 53
    fallenjtfallenjt Posts: 4,034member
    Quote:
    Originally Posted by David Garon View Post



    I have to wonder what the ponderously bureaucratic FDA, whose approval is required for medical use products and meds, among other things, has to do with the more limited utility of the Apple Watch at this initial stage. My guess is that the range of apps and enhanced functionality, that may already be built into the watch, will not be known for some time!

    Unless Apple acquire a medical device company specializing on this, I won't see it happening. Having been working in medical devices/pharmaceutical/biotech fields for years, I know it's not a simple thing like: just make a device and meet with FDA. It's a long process with all kinds of clinical studies and testings around the world with different populations/demographic regions proving device safety and efficacy. Imagine that an idiot plugs in the third party charger and blows up the device while it's monitoring his heart.

  • Reply 19 of 53
    fallenjtfallenjt Posts: 4,034member
    Quote:

    Originally Posted by Slurpy View Post



    People are REALLY under-estimating the significance of the Apple watch, and how it will solidify, enhance, and add a differentiator to Apple's ecosystem in so many ways, beyond just being another product. Wireless payments is just the tip of the iceberg, in terms of the "magic" this will bring to everyday scenarios. The Watch, by default, is already authenticated as long as it's been on your wrist, which is HUGE. This paradigm is impossible for a phone, since there is no way of knowing if you are using it or someone else.



    Unfortunately, most people (as well as reviewers) lack the imagination to see this potential, unless it is demonstrated in their faces.

    The only way to compromise Apple watch's wireless payment is that  someone chops off your wrist with the watch, then brings that cut-off hand to POS to use your Apple Pay.

  • Reply 20 of 53
    dr millmossdr millmoss Posts: 5,403member
    Quote:

    Originally Posted by jfc1138 View Post

     



    The FDA took notice (and IIRC there were meetings between FDA and Apple on the subject reported).

    http://www.bloomberg.com/news/articles/2015-03-30/fda-taking-a-very-light-touch-on-regulating-the-apple-watch




    The FDA is taking a "light touch" because Apple Watch is not a medical device. Apple probably had to demonstrate this to the FDA at some point, mainly in answer to the many rumors about it including advanced sensors.

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