Apple Inc. (NASDAQ:AAPL) CEO Tim Cook, along with comely supermodel Christy Turlington Burns, introduced the Apple Watch at a media event Monday.
As expected, just about everyone who could attend did — and then some. Many have been expecting Apple Watch to be the digital watch to end all watches.
Others expected Apple Watch to be the ringing in of a new generation of Apple products. Some were still waiting to be impressed by Apple’s new premium priced products and understand why so many people think it’s so chic to buy technology from the world’s largest company.
Well, to put it simply, the reviews were mixed. Most reviews, except the most devout Apple-istas, were not wildly enthusiastic. Some were more critical of Cook’s launch event than the Apple Watch itself. Some have issues with watches that cost between $350 and $17,000 and won’t be very functional in five years time.
The high-end watch, which goes for somewhere between $10,000 – $17,000, put AAPL in an odd place. That kind of pricing makes the Apple Watch a competitor with classic, handmade timepieces that cost large sums because they will last for generations.
The Apple Watch will certainly remain as attractive as it already is but will hardly be a functional wearable in a matter of years.
As for the base fitness model that will cost you $350, it has some decent features you can find in most smart watches on the market already that are more affordable. Since the Apple Watch doesn’t work on its own (you have to be connected to an iPhone), you are not only carrying around two devices, but you’re paying for them as well.
The one opportunity that the Apple Watch has to bury the competition is if it has a ton of apps ready for the watch when it launches. Most Android-based watches are lacking apps for the devices, since demand hasn’t been intense yet.
Ultimately, it’s not all about the Apple Watch. AAPL’s product portfolio is much broader and deeper than that. It will be interesting to see how well the watch does, but the company is still being driven by its phone sales; and that will be the case for some time to come.
AAPL occupies a unique space in the tech world. Apple is a new addition to the Dow Jones Industrial Average — one the 30 major companies in the U.S. — yet, it sells itself as a hip tech firm for savvy tech consumers.
The iPhone 6 is the biggest selling phone on the planet, which makes it the most common phone on the planet. Yet, AAPL can sell the iPhone 6 around the world at a premium price to all its competition, and the same premium pricing goes along with all its other products.
That’s the real magic of AAPL.
As long as Apple produces innovative, albeit iterative, products that people will line up for and pay a premium for, its business model is intact.
How the Apple Watch will fit into this model and how long this kind of dynamic will last is anyone’s guess.
Even if AAPL just gets a decent percent of its true believers to buy the Apple Watch, it will likely make headlines as success, since smart phone launches haven’t risen to this pomp and circumstance and sales have been tepid until now.
Maybe the Apple Watch will open up the whole sector as consumers now feel compelled to wear a smart watch, and Apple will be market leader in a new field again. Maybe consumers just aren’t feeling like adding more technology to their wrists for $350 and watches stagnate for now.
Regardless, AAPL will come out a stronger and better brand. It’s even showing up in the market — short sellers are dropping the size and duration of their shorts against Apple stock, even at these levels. Apple stock may come down a bit to around 120 and consolidate, but there’s plenty of upside left for AAPL, watch or no watch.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.