Apple Inc. (NASDAQ:AAPL) has had its share of ups and downs over the last several months, and today analysts at Jefferies have reaffirmed their hold rating on the stock. One of the main focal points of the latest report from Jefferies is on the long-rumored iWatch, which analyst Peter Misek believes won’t amount to much for the company.

Apple iWatch

Apple Inc. (AAPL)’s Rumored iWatch

According to Misek, the product will likely be just another watch and won’t make any major impact, either on the market or on the company’s bottom line. In his view, the iWatch will be more of a hobby item for fitness enthusiasts rather than Apple Inc. (NASDAQ:AAPL)’s next big product.

He said they’ve been trying out four different smart watches recently. They liked the one made by Nike, but they didn’t see much of a point for the devices to be used for general use rather than just for fitness. They said because of the small size of the smart watches, it makes the touchscreen difficult to use. They also found it easier to just pull a phone out of their pockets rather than attempt to use such a small touchscreen.

Will Apple Inc. (AAPL) Create New Watch Tech?

Misek said the only way they see Apple Inc. (NASDAQ:AAPL) being able to bring the smart watch over into general use is if it comes up with some kind of new technology for the device. Some of the suggestions he made were “extremely precise and widely functional voice control, gesture control and next-generation display technologies that create a hologram on your wrist.”

According to Misek, Apple Inc. (NASDAQ:AAPL) has one big thing going for it in the realm of smart watches. He says the bar has been set very low because most of his team’s experiences with other smart watches have been poor.

Also contrary to what others have suggested, Misek says if the iWatch does come into reality, he doesn’t think it will have a cellular chip or that it will be able to make phone calls. He believes it would have to be paired with an iPhone in order to be fully functional.

Estimates For Apple Inc. (AAPL)’s iWatch

Misek used Jefferies’ estimate of the iPhone installed base, which he says is 250 million, as the addressable market Apple Inc. (NASDAQ:AAPL) would have for a smart watch. His base case assumption calls for 5 percent penetration leading up to 6 million shipments each year, assuming that users replace their smart watch every other year. With a $175 average selling price and 30 percent gross margin, he says that adds up to around $1 billion in revenue and 27 cents in earnings per share, which is only about a 1 percent increase for Apple Inc. (NASDAQ:AAPL).

Jefferies’ price target for shares of Apple Inc. (NASDAQ:AAPL) is $420 per share.