Many analysts have predicted a lot of things about Apple Inc. (NASDAQ:AAPL)’s smartwatch. Consolidation of all those predictions clearly indicated that it was all over the map and this also clearly showed that success of Apple Inc. (NASDAQ:AAPL)’s smartwatch depends completely on the public response and marketing capability of Apple Inc. (NASDAQ:AAPL). Pacific Crest Securities Senior Data Analyst, Andy Hargreaves talked on CNBC about his reaction to Apple Inc. (NASDAQ:AAPL)’s presentation on smartwatch.
Hargreaves mentioned that he was expecting more information from Apple Inc. (NASDAQ:AAPL)’s presentation on smartwatches. He said that the battling function makes the smartwatch story interesting. He added that on one hand there is the fact that Apple Inc. (NASDAQ:AAPL)’s smartwatch does not have the compelling incremental features and on the other hand lies the weight of Apple Inc. (NASDAQ:AAPL)’s distribution capacity, manufacturing capacity and marketing ability. He insisted that Apple Inc. (NASDAQ:AAPL)’s smartwatch is going to be the best selling smartwatch, but he said that he could not quantify it at the moment.
Apple Inc. (NASDAQ:AAPL)’s smartwatch is going to have some incremental medical and health features. Will this add weight to the product? Hargreaves doesn’t think so. He said that medical functionality in Apple Watch is interesting but he feels that it was largely data collection, which he pointed out that many other products do even better. He added that it is unclear on what people want, whether it is the fully robust Apple Watch or the foolproof data collection tool like the one fitbit offers.
JP Morgan suggested that the profit margin for Apple Inc. (NASDAQ:AAPL)’s smartwatch is going to be around 39% – 44%. Hargreaves said that it might be a bit lower earlier, but he feels that it will get to that number as the product gets matured.
“I think the margins initially could be lower than that, only because obviously they have put a ton of money into this and custom tooling, custom manufacturing lines, all that stuff. And some of that’s going to come out of the gross margin, over time yeah I think it should be a high margin product and there is not a lot of BOM’s to it,” Hargreaves said.
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