The holidays may be a few months away, but one glance at the headlines shows that Christmas has come early for the tech community. Amid much fanfare, Apple Inc. (AAPL) unveiled a brand new smartwatch that even upstaged the introduction of the iPhone 6.
The Apple Watch (not the iWatch, interestingly) has been branded Apple’s “most personal device” ever. At $349 a pop, the Apple Watch features a customizable user interface overlaid with a scratch-proof sapphire crystal covering. The Apple Watch also pays homage to traditional watches in its overall design, including a crown and interchangeable wrist straps.
While the watch lived up to Apple’s strict aesthetic standards, the watch’s new functionality is what really stole the show. Because the screen is much smaller than other Apple gadgets, the touchscreen can differentiate between a tap and a press, opening up new ways for the user to interact with the display. The Apple Watch also comes standard with a gyroscope, accelerometer and a heart rate sensor, which enables the device to serve as a “comprehensive health and fitness device,” according to Tim Cook. In addition to health and fitness apps, the device will come equipped with Siri and standard apps for navigation, photos and messaging. The watch is expected to go on sale in early 2015.
This is the first time in several years that Apple has released a new category defining product, and just the rumors of the Apple Watch have spurred competitors to release their own smart watches. Intel Corp. (INTC) is going full steam with its fashionable MICA (My Intelligent Communication Accessory) bracelet and the Motorola 360 watch will hit shelves on Friday. Both smart watches focus more on aesthetic appeal over the back-end technology, so Apple still appears to have cornered the market in terms of innovation.
Going back to the big Apple reveal, the gadget giant also rolled out its next-generation iPhones, which are available with 4.7 inch and 5.5 inch displays (the largest ever). The iPhone 6 also features a sharper display, more battery life and an even better camera. The other big announcement was the Apple Pay system, which allows where iPhone users to use their phones in place of credit cards at retail stores. Apple already has retail agreements at stores like Macy’s Walgreens, Staples, Subway and McDonalds, and credit card agreements with American Express, MasterCard and Visa. As long as Apple and its credit partners make sure that security is water tight, this could be a very lucrative business for all parties involved.
With all of these developments in the works, Apple is looking great for the long haul. For FY 2014 Apple is expected to post 5.4% annual sales growth and 11.4% earnings growth (above the 9.5% industry average). For the following year, the consensus estimate is for 9.4% sales growth and 11.4% earnings growth (while the rest of the industry is expected to see profit fall 2.7%). Apple is also engaged in a massive $90 billion stock buyback program and pays a 2% dividend. And did I mention that the stock trades at less than 14 times forecasted earnings?
So after this latest Apple reveal, I still consider AAPL an A-rated Strong Buy.