iWatch could be a bigger hit than iPad



While smartwatches are currently a niche product, they may not stay that way for long, says USB analyst Steven Milunovich, who predicts that the iWatch could match sales of Apple’s iPad — unloading 21 million units in fiscal 2015 and a further 36 million units the following year.

The iPad, by comparison, sold 19.5 million units in its first year, rising to 47.6 million in its second. (The iPhone moved a relatively paltry 5.4 million units in its first year of sale, since it was still establishing Apple’s mobile platform.)

“We expect iWatch sales to roughly track iPad unit sales — similar penetration rates would mean higher sales,” Milunovich wrote in a note to investors. “iWatch might do better because the customer base is larger than when iPad launched and the ASP might be less.” However, he also hedges his bets — noting that the iWatch is Apple’s first wearable device, and that this might not appeal to all users.

In terms of launch dates, Milunovich agrees with recent reports placing it at later this year.

“We are more confident that Apple will be introducing the iWatch before the holiday season following WWDC’s introduction of HealthKit, recent healthcare hirings, the acquisition of LuxVue Technology, and positive comments from Eddy Cue at the Re/Code Conference,” he wrote. He also suggests that with a projected average retail price of $300, the iWatch could add 1-2 points of earnings per share growth. At this price Milunovich believes that Apple could achieve product margins of around 25% at launch — increasing to the low 30s over several quarters.

For those wondering what this would mean to Apple’s bottom line, Milunovich’s estimates would add a projected $6.5 billion in revenue to Apple’s fiscal 2015, and around $11 billion in revenue to the company’s fiscal 2016.

Source: USB note to investors



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