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Apple Inc. (AAPL): Is Apple Watch Circling the Smartwatch Drain?

Depending on who you ask, AAPL is either tanking or banking on Apple Watch sales

Uh-oh, Apple Inc. (NASDAQ:AAPL). Industry numbers suggest smartwatch sales are down in a big way, and that includes Apple Watch, which is tanking. However, AAPL is refuting these claims.

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Source: Via Apple

Rather than being in a dive, the company claims that its Apple Watch Series 2 is seeing record sales.

Who is right?

Industry Suggests Plummeting Apple Watch Sales

We first reported on the dire state of smartwatch sales at the end of October, when analytics firm IDC released third-quarter numbers. According to its data, smartwatch sales were down a whopping 51.6% on the year. The story was even worse for Apple.

According to IDC, Apple Watch sales were down 71.6% for the quarter. The time covered by the data included the first two weeks of the Apple Watch Series 2 launch.

IDC followed that report yesterday with a Q3 sales report on all wearables. Again, it spiked out Apple Watch sales as being particularly atrocious:

“The primary reasons for the downturn were an aging lineup and an unintuitive user interface. Though both issues have been addressed with the latest generation watches, Apple’s success will likely be muted as the smartwatch category continues to be challenged.”

The top five wearable vendors — including rivals Fitbit Inc (NYSE:FIT) and Samsung Electronics (OTCMKTS:SSNLF) — all posted growth, leaving Apple Watch out in the cold.

Apple Fires Back

Apple was quiet when the initial smartwatch sales numbers were released, but the company responded to IDC’s latest claims.

Speaking to Reuters, Apple CEO Tim Cook fired back against IDC’s suggestion that the Apple Watch has not only nosedived in popularity, but also its contention that it faces an uncertain future.

“Our data shows that Apple Watch is doing great and looks to be one of the most popular holiday gifts this year. Sales growth is off the charts. In fact, during the first week of holiday shopping, our sell-through of Apple Watch was greater than any week in the product’s history. And as we expected, we’re on track for the best quarter ever for Apple Watch.”

So Who’s Right?

Is the Apple Watch rebounding or doomed to “muted success”? It’s difficult to separate the success of the Apple Watch from the success of the smartwatch category overall. And sales numbers aside, there’s little doubt the product category has stumbled.

Lenovo Group Limited (ADR) (OTCMKTS:LNVGY) is backing away from releasing a new Moto 360, one of the most popular smartwatches running rival Android Wear operating system. Meanwhile Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) subsidiary Google delayed the release of version 2.0 of its Android Wear platform from the fall to early 2017.

One of the biggest tech stories of the past few weeks is a reflection of those IDC numbers in action. Fitbit — the leader in the still-growing fitness wearables category — appears to be on the verge of snapping up smartwatch pioneer Pebble for a bargain basement price.

In the short term, it seems that consumers are more interested in fitness wearables than smartwatches. That could be a question of cost, ease of use or battery life.

Interestingly, AAPL has aggressively addressed most of these issues with watchOS and Apple Watch Series 2. It slashed prices of the original Watch with the release of the new version, while a major update to watchOS made the smartwatch more intuitive and faster.

Battery life remains a challenge — it’s tough to power a wrist-mounted computer with a brilliant display and keep the device slim enough to please users, but complaints from owners about nightly charges have died down.

Apple has also stepped up its focus on health and fitness applications, including a new Apple Watch Nike+ model in partnership with Nike Inc (NYSE:NKE). AAPL’s moves — and claims about Watch Series 2 sales — suggest that AAPL is in it for the long haul.

Rather than sit out or retreat from a challenging market, it is adjusting the Watch to meet consumer demand with every intention of driving its smartwatch to being a long-term success story.

Once Q4 numbers are released, we should find out who was right about those Apple Watch sales. We’ll also have a pretty good idea about whether 2017 will continue to see sales slide or the smartwatch industry rebound, led by Apple.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/12/apple-watch-sales-aapl-fitbit-smartwatches/.

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