Apple (AAPL) Watch Units Could Top 40-50M Within Next Three Years - KGI

March 27, 2018 9:46 AM EDT
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KGI analyst Ming-Chi Kuo said he expects Apple (NASDAQ: AAPL) Watch shipments will grow 20-30% year-over-year in 2018 to 22-24 million units, up from 18.5 million units in 2017. Kuo is positive on the business momentum of Apple Watch in the next several years. He said under a best-case scenario, annual shipments of Apple Watch will top 40-50 million units within three years.

The analyst also notes LTE Apple Watch demand is better than expected, accounting for 60-70% of new model shipments in 2017.

Meanwhile, they expect new 2018 Apple Watch models to start shipping in 3Q18F. The main upgrades are: (1) both models to have around 15% bigger display size (diagonal); and (2) enhanced health monitoring functions. "A bigger display will enhance the display of more information on screen and accommodate a bigger battery capacity for longer battery life," Kou commented. "We also see Apple (US) seeking to improve the health monitoring functions of Apple Watch."

Kou thinks Apple is getting closer to finding the right product position for Apple Watch, e.g. built-in GPS for enhanced sport watch functions, built-in LTE connectivity for always-connected.

"We think that once the following requirements are met (within three years), annual shipments of Apple Watch will grow to 40-50mn units: (1) LTE Apple Watch is supported in more countries; (2) besides heartbeat monitoring, more health monitoring functions are added; (3) more FDA approvals are awarded; (4) a more trendy form factor design; and (5) continued lowering of prices for older models," the analyst concluded.

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