If Apple Creates a Watch Supercycle, AAPL Stock Can Run

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Many analysts and pundits have been extremely bullish about Apple (NASDAQ:AAPL) because they believe that the launch of 5G will spark tremendous demand for the company’s iPhones. I believe that optimism for AAPL stock is overdone because wearables are much better positioned than phones to exploit 5G devices.

Apple Event: New Offerings Leverage the Little-Known Future of Tech

Source: Apple Special Event September 10, 2019

But after the tech giant recently rolled out an important new feature for its $400 Apple Watch, I believe that product could potentially move the financial needle for Apple.

Further, both watches may become quite popular due to the advent of 5G. Consequently, huge sales of the watches may lead to significant gains for AAPL stock.

A Closer Look at AAPL Stock

From 2017 until 2019, I was very bullish on Fitbit (NASDAQ:FIT) stock, largely because the company kept indicating that it was close to rolling out a blood-oxygen monitoring feature for its higher-end devices.

But the company never did launch such a feature before it agreed to be acquired by Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) last year. (Now Fitbit has launched blood-oxygen monitoring, but it appears to only work when users are sleeping.)

I thought that measuring blood oxygen levels would lead to blockbuster sales for Fitbit because low blood oxygen can be a sign of many serious conditions.

For example, according to Medical News Today, low blood oxygen can indicate heart diseases, pulmonary fibrosis or scarring and damage to the lungs as well as sleep apnea. Of course, heart disease and sleep apnea are quite prevalent in the western world today, while pulmonary fibrosis is a major risk for those who have smoked. 

Now that Apple has added blood-oxygen detection to its $400 Apple Watch, I believe that tens of millions of consumers who want to closely monitor their health could buy the device.

COVID-19 Detection

High-tech-news website Tom’s Guide recently noted that  Dr. Richard Leviathan, an emergency medicine doctor, had written in The New York Times that blood-oxygen detectors could be used to determine whether someone’s life is being threatened by the virus.

Specifically, he said blood oxygen detectors may act as an early warning system for breathing problems associated with Covid pneumonia.

Tom’s Guide correctly pointed out that Apple Watch will not be able to detect coronavirus, but the device could indicate whether people who have tested positive for the virus and are still at home have deteriorated to the point where they need to go to the hospital.

Since coronavirus patients often can’t tell on their own when they’ve reached   that point, Apple Watch’s blood-oxygen  detector could indeed be very important and save lives.

5G and Apple Watch

Because it’s much more convenient for people to glance at their watches than to take out and/or continuously hold their phones, I believe that watches, not phones, will get the biggest sales boost from 5G. Further, unlike phones, 5G-enabled watches can be used to monitor physical movements and users’ mental and physical attributes.

As I reported in April 2019  5G technology will let marketers better target customers with location-based ads. It’s easy to see that it will be much more convenient for shoppers to continuously access such ads with watches than with their phones.

In the same story, I noted that  5G-enabled watches should allow coaches to better evaluate athletes’ performance by more precisely assessing their forms and techniques. Such watches could be used to evaluate employees’ physical and mental condition. Bloomberg was reporting at the time that a start-up was evaluating the mental fatigue of ride-hailing drivers.

To create an Apple Watch supercycle, Apple will have to launch an intensive marketing campaign that will reach both businesses and consumers.

Retailers will have to be informed of the location-based marketing capabilities of 5G-enabled watches. Key employers must be told about the devices’ ability to monitor their employees’ fatigue and stress levels.

Most importantly, consumers have to learn about the ability of the more expensive new Apple Watch to monitor blood-oxygen levels and the positive implications of that capability.

The Bottom Line on AAPL Stock

Unless Apple can ignite an Apple Watch supercycle, I believe that Apple’s shares are unlikely to perform well over the longer term. But in order to generate strong demand for the device, the tech giant must launch a fairly large marketing campaign.

In light of this situation, I would advise investors to see if the company follows that strategy before buying AAPL stock at these levels.

On the date of publication, Larry Ramer held a long position in FIT. 

Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.


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