But can Apple change this perception? If the iPhone is any indication, there’s a chance it can, and UBS Group AG (USA) analysts think Apple will indeed.
No killer Apple Watch app yet
In a report dated May 11, UBS analyst Steven Milunovich said they received their Apple Watch last week and found that the early reviews about it being something that’s nice to have are correct. He agrees that the design and bands are nice but notes that apps are pretty slow to load. Further, He says that many of the apps on the Apple Watch are just too much for such a small screen.
He also pointed out that the Apple Watch is, of course, a watch, adding that he hasn’t worn a watch in the past six years. Nonetheless, he likes having the time and temperature easily available on his wrist. Also he likes being able to see text messages without having to fish out his smartphone. He thinks Apple Pay is “fun” but has found that it can be difficult to position the watch correctly to use the feature. Additionally, he calls receiving calls on the Apple Watch “Dick Tracy cool.”
Any demand for the Apple Watch?
The UBS analyst called demand for Apple’s smartwatch “questionable,” noting that he recently cut his unit estimate from 40 million to 31 million and trimmed his estimate of iPhone 5/6 users who will buy the watch from 10% to 7%.
However, he believes the smartwatch could become a must-have as the Internet of Things develops and it can be used to connect to and control connected devices throughout the home. UBS has a Buy rating and $150 per share price target on Apple.He added that his watch arrived earlier than expected, which means Apple is beginning to catch supply up to demand. Further, he is concerned that Apple’s decision to roll the smartwatch out to more countries late next month could mean that demand is “mediocre.” Milunovich also said he thinks people who don’t currently wear a watch may be easier to sell on the Apple Watch and is worried that his kids “aren’t whining to get one” yet.
Apple price target upped for iPhone sales
Canaccord Genuity analysts Michael Walkley and Siddharth Sinha actually bumped up their price target for Apple from $155 to $160 per share after their latest analysis of iPhone sales. They estimate that Apple again dominated the smartphone market during the first quarter of 2015, taking about 92% of the profits in the industry. That’s pretty close to the approximately 93% profit share they estimated for the fourth quarter of 2014.
They expect Apple to continue seeing strong iPhone 6 sales as only about 20% of the user base has upgraded so far. Further, they believe Apple will continue to gain share throughout the rest of this year as the biggest-screen iPhones steal share from Android phones. They’ve apparently found evidence that a greater number of Android users are switching to the iPhone 6 or 6 Plus compared to the iPhone 5 product cycle.
By the end of this year, they expect the number of iPhone users to hit 505 million, a 26% increase year over year. Looking out much further, they’re expecting 665 million iPhones by the end of 2018, which would mean Apple would have about a 40% share of the projected 1.67 billion global “premium” smartphone users that year.
Of course if the Canaccord Genuity team is right about their ultra-bullish iPhone projections, then it should do wonders for the Apple Watch, particularly if Milunovich is right about the watch becoming the go-to device to control the Internet of Things.