Apple Inc. (NASDAQ:AAPL) shares have been assigned a price target of $120 (from $115 previously) by RBC Capital analysts on Monday. The new price target is based on estimates for the upcoming Apple Watch, which is expected sometime around March 2015.
A “conservative” estimate
RBC analyst Amit Daryanani said on Monday that the latest price estimate assigned to the stock is based on estimates that Apple could sell 20 million units of the wearable device in the first 12 months with an average selling price of $520, which will contribute $10 billion to revenue over the period. The 20 million figure suggests a 10% penetration rate for existing iPhone sales in fiscal 2015 and is similar to the number of iPad sales sold in their first year.
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The Cupertino, Calif.-based company has largely kept the development of its smartwatch behind the scenes, just revealing the approximate time of its launch and starting price of $349. Some models of the Apple Watch, like the 18-karat gold edition, are expected to sell for over $1,000.
Daryanani noted that the significant areas of concern regarding the Apple Watch are the battery life, gross margin, penetration rate among the iPhone user base, and the Apple Pay integration. However, the analyst expects the gross margin on the device to be at 50%, boosting the company’s overall margin. Daryanani considers his estimates to be “conservative” and expects investors to share his approach as the gadget will require tethering to an iPhone 5 or later.
No dearth of rivals for Apple Watch
There is no shortage of competition for Apple even before it has released its smartwatch. Intel recently unveiled the snakeskin bracelet known as My Intelligent Communication Accessory, or MICA. Users wearing MICA will not be required to carry a mobile phone with them, which is a step ahead from other smartwatches. MICA is enabled to connect the user with Facebook, Google and Yelp through AT&T plans.
A few days ago, Apple design head Jony Ive said that they have aimed at designing the Apple Watch while keeping in mind the varying customer demands and preferences. Ive said that one of the biggest challenges was that not everyone wants to wear the same watch.
Apple shares have been trading at an all-time high, both in terms of share price and market capitalization. On Monday, Apple shares closed down .17% at $113.99.