At this point with Fossil seeing double-digit growth and a forward P/E ratio of 15 it’s not a short candidate yet. However, once Apple releases this new product I believe we will see that luxury consumers will make the switch from Fossil to Apple.
In my opinion, Fossil looks to lose the most, as it simply does not have the technology to compete with a company such as Apple. In terms of upside for Apple, the company already has sales of $164 billion, therefore the $5 billion-$10 billion that it could earn from watches won’t make too much of an impact from a valuation point of view. The importance of this catalyst is not the watch itself, but rather Apple increasing its product line and entering new spaces. Then, as a result, with the stock being cheap, it should rise as investors see proof of innovation; meanwhile Fossil could and most likely will decline.
The article Apple to Take Market from Fossil originally appeared on Fool.com and is written by Brian Nichols.
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