Is the Apple Watch Series 3 a Game-Changer for Apple Inc. Stock?

When it was first announced, there were predictions that Apple Inc.’s (NASDAQ:AAPL) Apple Watch would become its next killer product, following in the path of the iPhone, iPad and iPod. While it is the world’s top selling smartwatch, Apple Watch sales have failed to meet lofty expectations.

Is the Apple Watch Series 3 a Game-Changer for Apple Inc. Stock?

Source: Apple

However, one analyst has been studying the Apple Watch Series 3 numbers, which suggest that this latest version could be a “game changer” that delivers big sales over the holidays — and going forward.

The reported momentum of the Apple Watch Series 3 is good news for Apple as it seeks to reduce its revenue dependence on the iPhone. Growing Apple Watch sales could finally give AAPL stock the boost that’s been hoped for since the wearable was first released.

Apple Watch Series 3

While the big product announcement of September’s Apple event was the iPhone X, the company also introduced an upgrade to its smartwatch line-up. The Apple Watch Series 3 is the third generation of the wearable that was first introduced in 2015. This latest version offers a performance boost, along with new health features like notifications for an unexpected elevated heart rate.

But the biggest deal with the Apple Watch Series 3 is cellular connectivity. For the first time, Apple is offering the option of LTE capability, meaning this smartwatch can take calls, receive notifications, access Siri and stream music without being connected to an iPhone. That’s a key feature that its biggest challenger — Fitbit Inc’s (NYSE:FIT) new Ionic smartwatch — can’t touch.

And GBH Insights analyst Daniel Ives thinks this is a game changer.

“Significant Momentum”

CNBC reported on Ives’ research, which included surveying Apple Watch Series 3 buyers at Apple Stores. He found that 70% of buyers did not already own an Apple Watch, suggesting that the new release is driving Apple Watch sales from a previously untapped market.

At the same time, as 9to5Mac points out, the fact that 30% of the sales are coming from existing Apple Watch owners — whose devices are at most only three years old — is an impressive statistic in its own right. It means Apple has brought enough new features to the table to convince owners of these devices to spend the money on an upgrade.

Ives goes on to write that “the Apple Watch Series 3 could be a ‘game changer’ release for Cupertino to open up this wearables category for the coming years.”

With Apple revenue so reliant on the iPhone in a maturing smartphone market, the possibility of the Apple Watch Series 3 ramping up widespread adoption is a big win for AAPL stock.

In the shorter-term, the GBH Insights research note suggests the Apple Watch Series 3’s “significant momentum” is putting Apple on track for an even better holiday season than usual. We were already looking for the company to have a blowout holiday quarter, thanks to the iPhone X, new 4K Apple TV and HomePod smart speaker. Having Apple Watch sales take off would make it even sweeter for AAPL investors.

Will Apple Watch Sales Impact AAPL Stock?

In the lead-up to its release, the Apple Watch was predicted to be the next big thing, a must-have gadget that could eventually replace the iPhone as a key driver of AAPL stock. There was an expectation that Apple Watch sales for the first year could be as high as 30-40 million units.

The reality was much less than that. Sales were estimated at 12 million for the first year of availability. Disappointing to many, but still enough to capture over 60% of smartwatch sales worldwide, generating somewhere around $6 billion in revenue — and doubling the iPhone’s sales in its first year. After that first year and its early adopter rush, the Apple Watch sales situation got a little grim, before bouncing back as the company focused on the health and fitness applications of its wearable.

According to IDC numbers, Apple Watch sales were 3.4 million in Q2 2017, up 49.7% year-over-year. Add the new Apple Watch Series 3 into the mix with its appeal to new smartwatch buyers and to upgraders, and the holiday quarter is looking very good for Apple. Even more importantly, if the Apple Watch Series 3 momentum lives up to the GBH Insights predictions, Apple Watch sales will be having a very real impact on Apple revenue — and APPL stock — in the long-term.

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

Article printed from InvestorPlace Media,

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