Sometimes Apple Inc. (NASDAQ:AAPL) releases a product out of left field. No one sees it coming. Other times, it seems only a matter of time before the company wades into a market. A new analyst prediction that we’ll see wireless Apple headphones, possibly before the year’s out, falls into the latter camp.
With impressive AirPod sales, design know-how from Beats, the disappearance of the headphone jack from its iPhones and a push to grow the company’s ‘Other Products’ division revenue to boost AAPL stock mean Apple headphones are all but inevitable.
Analyst Says to Expect Apple Headphones
Apple Insider covered the latest investor note from KGI’s Ming-Chi Kuo — someone who has a proven track record when it comes to predicting Apple’s moves. Kuo expects Apple to debut a “branded high-end, over-ear headphone.”
The Apple headphones would join AirPods and the HomePod smart speaker as part of the company’s audio accessory lineup.
Apple doesn’t do cheap, so it’s not a surprise that Kuo is predicting the Apple headphones will be aimed at the higher-end market.
He also says they will feature an “all-new” design, but what this actually means is unclear. It’s possible that they’ll be slimmer than Apple’s Beats headphones — AirPods with a band. Whatever the end design turns out to be, you can count on them being wireless headphones, with Siri capability, advanced technology like Apple’s W1 wireless chip and of course, a prominent Apple logo on the ear cup.
Expect them to be differentiated from Apple’s Beats headphones in terms of audio performance as well. Beats are famously tuned to be heavy on the bass. The Apple headphones are more likely to offer a balanced audio experience.
AirPod Sales and the Wireless Headphone Market
Apple’s AirPods were widely mocked when introduced, but have turned into a genuine hit product. Helped along by the decision to remove the traditional audio jack from iPhones starting with the iPhone 7, Apple has helped to kickstart a rush for wireless headphones.
The market for headphones and earbuds is predicted to hit $15.8 billion by 2025. And wireless accounts for a growing chunk of that market as more smartphone makers dump the headphone jack. Samsung is still sticking with it. But Alphabet Inc’s (NASDAQ:GOOGL) Google recently went headphone jack-free with its Pixel 2 smartphones and other manufacturers are following suit.
As a result, for the first time, in 2017 sales of Bluetooth headphones overtook traditional, wired headphones in U.S. sales, with Apple’s Beats brand leading the charge. And despite supply shortages, Apple AirPod sales accounted for 85-cents of every dollar spent on fully wireless earbuds in the U.S. for much of 2017.
Kuo is calling for AirPod sales to hit anywhere from 24 million to 26 million units this year. With that kind of demand for wireless audio, Apple is obviously aware of the potential to grow its market by expanding beyond earbuds.
Other Products Increasingly Important to AAPL Stock
It’s no secret that Apple is hitting an iPhone slowdown despite the iPhone X. That’s not good news for AAPL stock, which has seen phenomenal growth thanks to a decade of record-setting iPhone sales.
However, the company’s Other Products division — which includes Beats headphones and AirPods — led Apple in growth last quarter, posting a 36% year-over-year gain. With quarterly revenue of nearly $5.5 billion, Other Products is within striking distance of overtaking iPad sales as the fourth largest revenue source for the company.
It only makes sense that Apple would want to take advantage of the current market demand by increasing its wireless headphones offerings. Apple headphones may cannibalize some Beats headphone sales, but the payoff is likely to be an even bigger market share for Apple and boosted revenue for the Other Products division.
The cost is speculation at this point, but expect any Apple headphones to carry a premium price.
And as for availability, Ming-Chi Kuo says not to expect them until Q4 at the earliest. If there’s any way to have them here in time for Q4, however, Apple will do it. Don’t expect the company to repeat the mistake of having the HomePod miss the holiday shopping season.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
