UBS: Apple Watch Demand Has Only Just Begun

Apple Inc AAPL’s Watch is still in the early innings of its potential, according to UBS.

The Analyst

UBS analyst Timothy Arcuri maintains a Buy rating on Apple with a $250 price target.

The Thesis

The Apple Watch continues to gain traction, with unit volumes steadily increasing, Arcuri said in a Wednesday note. (See his track record here.)

Higher Apple Watch prices for the latest Series 4 models could add 100 basis points of incremental revenue growth in 2019 for the entire company, the analyst said.

The Apple Watch alone could account for up to 5 percent of revenues in 2019, which is the equivalent of 15 million more iPhone units, Arcuri said. Data suggest that consumer interest is meaningfully higher in Japan and Hong Kong compared to last year and is slightly higher in the U.S., France and Great Britain, he said.

“Availability data suggests wait times have not changed materially since the launch. In comparison, lead times declined very quickly last year after the Watch Series 3 launch. Availability data combined with increased interest level suggest healthy demand trends for Watch."

UBS Evidence Lab surveys indicate that over 50 percent of respondents are still unlikely to purchase a smartwatch, meaning the pool of potential future buyers remains deep, Arcuri said.

Price Action

Apple shares closed 2.83 percent higher Thursday at $219.34.

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Photo courtesy of Apple.