Wearable technology, one of the highest-growth areas in tech, is being closely watched by investors, entrepreneurs and Silicon Valley heavyweights alike. That includes, of course, Apple Inc. (AAPL), which burst onto the wearable technology scene last year with its Apple Watch.
Alas, a year has passed and the Apple Watch isn’t a meaningful driver of AAPL stock as some investors hoped. Initial shipments and reviews were underwhelming, and Tesla (TSLA) CEO Elon Musk has even openly lampooned the device’s design.
Now, just as the Apple stock price languishes below $100 — shares are down 25% in the last year — we’re getting news that the Apple Watch price for some models has been slashed by $100 at select retailers.
If you own Apple stock, now might be a good time to ask yourself a simple question: Is that an omen or a sign of brighter days ahead?
The answer isn’t so simple.
AAPL Owners: Watching Apple Watch Prices
The International Business Times notes that major electronics retailers like Best Buy (BBY) and B&H have reduced Apple Watch prices for two of the cheapest models by $100, which isn’t an insignificant reduction when compared to the original price tag.
The 38 mm Apple Watch Sport has been slashed from $349 to $249 at the two retailers, while the 42 mm model has been cut from $399 to $299, reports IBT.
But how, pray tell, do these adjustments impact AAPL stock?
On the surface, this isn’t big news. The iPhone still drives more than two thirds of all Apple revenue, while the Apple Watch isn’t even successful enough to warrant its own product category in earnings releases. If we dig a little deeper, though, this could be either very bad or very good for the Apple stock price.
Bad side first: If you’ve paid attention to the plight of GoPro (GPRO) even remotely over the last year, you know that the company’s fall from grace has been swift and unforgiving. Shares are down 76% in the past 52 weeks, and the vast majority of that plunge was due to GoPro’s Hero Session 4, its most recent wearable camera that was badly mispriced. Hopefully, AAPL learned a lesson from GoPro’s woe-woes.
The initial price tag was $399. After extremely soft demand out of the gate, GPRO lowered the price to $299. More recently, it cut it another $100 to $199, half its original cost.
The good thing about Apple Watch being lost in the Cupertino shuffle is that the Apple stock price won’t plunge if there was a mistake made on Apple Watch pricing. If the iPhone gets mispriced, we’ve got a problem.
Still, Apple is trying its darnedest to diversify from the maturing smartphone market and into higher-growth areas like wearable tech, so an early fumble here could represent a larger opportunity cost than anything else.
How, then, could the Apple Watch price cut be a good thing for the price of AAPL? Well, there are some strong hints that the price reduction could precede the unveiling of the Apple Watch 2.
Now, there will certainly be a sequel to the first Apple Watch, the question is simply when. And the bigger question is whether the Apple Watch 2 will be sleeker, cooler, more useful, more heavily marketed and ultimately more profitable than the first one.
Rumor has it that when Apple drops the next Apple Watch it’ll have the ability to make video calls, come with improved health sensors and be even smaller than the original.
I tend to agree with this line of reasoning, and think the slimmer Watch will be a much bigger success. After all, big things can come in small packages.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at email@example.com.
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