Apple Inc.’s (NASDAQ:AAPL) big day was yesterday, with the company finally taking the wraps off the iPhone X and the iPhone 8.
While it’s the iPhone that’s responsible for AAPL stock being where it is today, two other new products the company also unveiled could turn out to be a much bigger deal than expected: the Apple Watch Series 3 and the Apple TV 4K.
Apple Watch Series 3
The Apple Watch hasn’t turned out to be the runaway hit many had predicted, but it dominates the smartwatch market. With a new focus on fitness, sales have been up 50% this year. However, it does face a new challenger from Fitbit Inc (NYSE:FIT), which is releasing its first smartwatch, the Fitbit Ionic.
Apple’s answer is the Apple Watch Series 3, the first new product to be introduced at the iPhone event.
The big news on the new Apple Watch is its optional LTE cellular connection. That means the Apple Watch Series 3 can cut the iPhone cord. On its own — no iPhone involved — the new Apple watch can make telephone calls, message, use Siri, use Apple Maps, receive notifications and stream Apple Music.
A new CPU offers a big performance boost, and Siri now gets to speak as well as be seen. Also on tap is a focus on heart health, with an improved sensor and features including an alert if the wearer’s heart rate suddenly elevates without physical activity.
The new Apple Watch Series 3 is available for pre-order on Sept. 15 and ships on Sept. 22. It’s priced starting at $329, or $399 with LTE. Cellular plans will cost extra and the Apple Watch will share a phone number with the iPhone.
The Apple Watch Series 2 has been discontinued, but the Series 1 is still available, starting at $249.
Apple TV 4K
Apple finally answered Roku, Amazon.com, Inc. (NASDAQ:AMZN) and all the other companies that left the Apple TV in the 1080p dust …
The Apple TV 4K looks identical to the previous model, but gains 4K Ultra HD playback and HDR support. The new streamer gets a powerful A10X Fusion chip to handle the video crunching — also offering a big boost in gaming performance.
Apple is pushing more live sports and news to its box to satisfy cable cutters. 4K content will be coming from Netflix, Inc. (NASDAQ:NFLX) and eventually Amazon, as well as from Apple’s own iTunes Store — where the company has pulled off an impressive deal with movie studios, offering 4K movies for the same price as HD versions.
The Apple TV 4K starts at $179. It’s available for pre-order on Sept. 15 and in stores on Sept. 22.
Boosting Other Products and Services
The release of the iPhone X and iPhone 8 will likely boost that critical iPhone revenue, but it’s anyone’s guess if that will be a temporary upgrade bump, or whether Apple actually sees numbers that remain meaningfully higher.
The smartphone market is mature and it would have to convince owners of Android smartphones to jump ship for a real, sustained increase.
However, the smartwatch market is just getting started. Apple already dominates, but sales are relatively low. With the Apple Watch Series 3, there is plenty of headroom for growth and cutting the cord to the iPhone may just be the move that’s needed to push sales to the next level.
It may also spur the first real round of upgrades from existing Apple Watch owners. Add in the new health-related features — which don’t just help to fend off the Fitbit Ionic, but also give the Apple Watch Series 3 an entry into a lucrative health monitoring market — and the Apple Watch could live up to its initial expectations of being the next big thing for AAPL stock.
The Apple TV 4K is playing catch up, but Apple has a big ace up its sleeve in 4K movie pricing and free 4K movie upgrades for iTunes customers. Converting a movie library to a new format is an expensive proposition. Apple is offering its customers a huge stick to buy an Apple TV 4K with a free upgrade offer.
For example, I have a library of over 150 HD movies bought over the years from the iTunes Store. If I were to replace those with 4K Blu-ray versions at $25 a pop, it would cost me nearly $4,000. If I buy a $179 4K Apple TV, I can get that library upgraded to 4K HDR versions through iTunes for free. That’s a really big carrot…
Apple’s ability to negotiate 4K HDR iTunes movies for the same price as HD versions also bodes well for iTunes revenue in that Services category. The iTunes store already gets early release dates that beats most movies to store shelves by several weeks, while matching store pricing. Getting the same early window for 4K movies while also having a price advantage over physical discs is a big win.
With the Apple Watch Series 3 and Apple TV 4K, Apple may have two solid hits. And wins for the Other Products and Services divisions that help boost AAPL stock.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
