UBS survey finds 10% of consumers want a smartwatch, expects 24M Apple Watch sales in fiscal 2015
A new survey from UBS suggests that the Apple Watch could get off to a strong start, leading the investment firm to predict sales of 24 million units and gross profit of $3.4 billion from the wearable device in its first few months alone.
In its poll of 4,000 consumers, UBS found that 10 percent of consumers said they are "very likely" to buy a smartwatch in the next 12 months. Applying that same percentage to the total number of eligible iPhone owners, UBS believes Apple will sell 24 million Apple Watches in its first nine months of availability.
Detailing the results in a note to investors on Monday, analyst Steven Milunovich noted that the first version of the Apple Watch has a number of limitations, most notably its dependence on a connected iPhone for functionality. But he believes the first-generation device will set up Apple for long-term success in the wearables market.
Still, in the first few months, Milunovich believes Apple will sell 24 million of its Watch with an average price between $420 and $430. That would result in sales of $10.3 billion, and with an assumed 33 percent level of gross margin, would add $3.4 billion in profit to the company's bottom line for fiscal 2015.
Apple's fiscal 2015 concludes at the end of September, so Milunovich's estimates don't include the 2015 holiday shopping season.
Looking to fiscal 2016, Milunovich's estimates increase to 40 million units, resulting in $17 billion in sales and $6.2 billion in profit. And by 2018, his projections call for Apple to be selling 67.6 million Apple Watch units in a single fiscal year.
The analyst said it's likely that the iPhone and Apple Watch will prove to be complementary products, much like the Mac and iPad. But he said it's also possible that the Apple Watch could eventually become the successor to the iPhone.
"Given that two-thirds of Apple's profit is generated by the iPhone, the company has to be concerned about the longer-term threat of replacement technology, whether it be a leap in handset technology or loss of key functions to wearables," Mulinovich said. "With a sophisticated user interface and third-party apps coming on, Apple may be readying for the time when the Apple Watch encroaches on the smartphone market."
The UBS survey also delved into specific brands, and found that for now consumers are more interested in the currently available Samsung Gear. Among respondents who plan to buy a smartwatch, 37 percent said they would purchase a SamsungGear, while 25 percent said they are waiting for the Apple Watch.
Milunovich expects the tables to quickly turn in early 2015, when the Apple Watch becomes available and shakes up the existing wearables market.
"Just as Apple wasn't the first MP3 or smartphone vendor but redefined those categories, we expect Apple Watch to become first to mind in smartwatches," he said.
UBS has maintained its "buy" rating for AAPL stock with a 12-month price target of $125.
In its poll of 4,000 consumers, UBS found that 10 percent of consumers said they are "very likely" to buy a smartwatch in the next 12 months. Applying that same percentage to the total number of eligible iPhone owners, UBS believes Apple will sell 24 million Apple Watches in its first nine months of availability.
Detailing the results in a note to investors on Monday, analyst Steven Milunovich noted that the first version of the Apple Watch has a number of limitations, most notably its dependence on a connected iPhone for functionality. But he believes the first-generation device will set up Apple for long-term success in the wearables market.
Still, in the first few months, Milunovich believes Apple will sell 24 million of its Watch with an average price between $420 and $430. That would result in sales of $10.3 billion, and with an assumed 33 percent level of gross margin, would add $3.4 billion in profit to the company's bottom line for fiscal 2015.
Apple's fiscal 2015 concludes at the end of September, so Milunovich's estimates don't include the 2015 holiday shopping season.
Looking to fiscal 2016, Milunovich's estimates increase to 40 million units, resulting in $17 billion in sales and $6.2 billion in profit. And by 2018, his projections call for Apple to be selling 67.6 million Apple Watch units in a single fiscal year.
The analyst said it's likely that the iPhone and Apple Watch will prove to be complementary products, much like the Mac and iPad. But he said it's also possible that the Apple Watch could eventually become the successor to the iPhone.
"Given that two-thirds of Apple's profit is generated by the iPhone, the company has to be concerned about the longer-term threat of replacement technology, whether it be a leap in handset technology or loss of key functions to wearables," Mulinovich said. "With a sophisticated user interface and third-party apps coming on, Apple may be readying for the time when the Apple Watch encroaches on the smartphone market."
The UBS survey also delved into specific brands, and found that for now consumers are more interested in the currently available Samsung Gear. Among respondents who plan to buy a smartwatch, 37 percent said they would purchase a SamsungGear, while 25 percent said they are waiting for the Apple Watch.
Milunovich expects the tables to quickly turn in early 2015, when the Apple Watch becomes available and shakes up the existing wearables market.
"Just as Apple wasn't the first MP3 or smartphone vendor but redefined those categories, we expect Apple Watch to become first to mind in smartwatches," he said.
UBS has maintained its "buy" rating for AAPL stock with a 12-month price target of $125.
Comments
I am in that 10%
What is this analyst's track recording in forecasting new product sales?
We already know it extends the functionality of an iPhone, why are you trolling with such a comment?
The AppleWatch hasn't been marketed as, nor referred to as a 'smartwatch' by Apple. They just call it a watch, which to me suggests their intentions: the target market is people with wrists.
We already know it extends the functionality of an iPhone, why are you trolling with such a comment?
Why does Pazuzu do anything? I blocked him a long time ago, been happier ever since.
10%- that's a hard sell. It better work seamlessly- flawlessly. And not be dependent on the iPhone.
…or what? You'll boycott it? Pffft.
I'm buying one because I can see a number of useful applications, and because I can see its evolutionary significance in the relentless trend towards miniaturization, AND because Sir Jonny seems to have hit yet another one out of the park.
I don't care what any analyst or other fools says about it.
But you're missing out on all that bracing hatred for a miserable, sniveling troll. Like the smell of napalm in the morning, etc.
The Analyst said it's likely that the iPhone and Apple Watch will prove to be complementary products, much like the Mac and iPad[/QUOTE]
In what way? I don't disagree they aren't complimentary in some respects, but it's NOTHING like the ?Watch and the iPhone. The iPad can do almost anything the Mac can do, albeit on a scaled level, and it can do some things a Mac can't do at all. A person truly could buy one or the other, and never need the other to do most things people use computers for these days. Both are stand alone products that do not need the other to accomplish similar tasks.
The ?Watch relies on the iPhone for most everything, chief among that -- connectivity. Without the iPhone, the watch is ... A watch. And a limited fitness tracker. And possibly an ?Pay "credit card" depending on the requirements for that feature. Maybe a calculator, and a few other limited apps that don't depend on outside information to function, or need much screen real estate to use. But it's not an either/or proposition. Nothing like the Mac and iPad. The ?Watch is not going to replace the iPhone anytime soon.
I've been saying this since the hour Apple announced its Watch.
I don't see how it could be the successor to the iPhone in the same way the iPhone isn't the successor to the iMac. They are very, very different tools.
I don't disagree with ?Watch 1.0, but the point is that it may "eventually" succeed the iPhone. How? Give it 5 years and at that point I would envision it has its own LTE, etc... Now the big issue to my mind is…who would want to go from an iPhone 6/6+ size screen down to a 38mm one? I don't think so. Unless perhaps its got a holographic screen.
That's predicated on a few things happening (like the phone functions drawing less power, and/or breakthroughs in battery power density). These analysts aren't engineers or scientists, but they seem to think everything magically follows Moore's Law.
Even then It's not a complete solution. People seems to want a large screen Internet device everywhere they go, because a mobile phone isn't just for voice calls any more. Apps dominate smartphone usage. Surface area isn't just for viewing content: it's also more area for user input, and a wrist-bound watch doesn't have a lot of screen area. So I'm not convinced that a smartphone will ever be replaced by a watch, even if you could make calls all day long from a watch.
I love these analysis, 10% (BTW that is not a good number, that is a lot closer to 0 than 100) of the people said they are interested in the watch and that turns into 25M for a year. Which 10% of the 7B on plant earth are they talking about.
They can come up with what ever number that like since they will never be proven right or wrong since we all know Apple has no plans to release the numbers.
I don't see how it could be the successor to the iPhone in the same way the iPhone isn't the successor to the iMac. They are very, very different tools.
I think road warriors will always opt for biggest screens but casual users will forgo screen size for mobility. People must realize there is more than a casual or coincidental relationship between the iPhone and Watch. It will play out over the next decade, nothing will change overnight!
One thing we know for sure is ?Watch is not a hobby. If Apple's ?Watch section on their website is anything to go by I think the marketing for this is going to be impressive and massive.
I don't disagree with ?Watch 1.0, but the point is that it may "eventually" succeed the iPhone. How? Give it 5 years and at that point I would envision it has its own LTE, etc... Now the big issue to my mind is…who would want to go from an iPhone 6/6+ size screen down to a 38mm one? I don't think so. Unless perhaps its got a holographic screen.
I think road warriors will always opt for biggest screens but casual users will forgo screen size for mobility. People must realize there is more than a casual or coincidental relationship between the iPhone and Watch. It will play out over the next decade, nothing will change overnight!
Yep. This is why I agree with the folks who say the 5.5" iPhone is the true new iPhone, the one where Apple's going to focus. Yes, it's unwieldy for one handed use...but what if you didn't really have to use it because all your interactions were through the Watch? This is also why it's good they're getting all the kinks worked out of Continuity now. Handle 70% of interactions with the Watch, push the other 30% to your iPhone/iPad/Mac.
And I also agree that eventually, the iPhone won't be necessary. Then the future becomes Watch > iPad > Mac, not iPhone > iPad > Mac.
I love these analysis, 10% (BTW that is not a good number, that is a lot closer to 0 than 100) of the people said they are interested in the watch and that turns into 25M for a year. Which 10% of the 7B on plant earth are they talking about.
They can come up with what ever number that like since they will never be proven right or wrong since we all know Apple has no plans to release the numbers.
400 of the 4000 people polled said they would buy it = 10%
They then applied that number to the eligible iPhone owners = 24 million
which would be 240 million eligible iPhone owners.
Hmmmm...
240 million?... where the hell did they get that number??!!