A version of this article originally appeared on Fool.com
WASHINGTON, DC As the year ofApples (NASDAQ:AAPL.US) smartwatch approaches, investors and analysts are beginning to give the upcoming device more weight in their stock price targets. The estimates of exactly how well the device will sell range widely, leaving us little option but to guessabout the level of demandfor the Apple Watch in 2015. Maybe new commentary from Morgan Stanleys longtime Apple analyst, Katy Huberty, will help bring the sales picture into focus.
Apple Watch. Image source: Apple.
Apple stock is headed to at least $126, or 6.5% higher than the share price at the time of this writing, Huberty predicts.This is up from her previous 12-month target of $115. Pre-split, thats $882. Most notably, $126 would give investors who bought Apple at its lows in 2013 more than a whopping 120% return.
But Hubertys projected range for Apple stock extends well beyond $126. Her bull case sees shares reaching as high as $150, up about 29% from where Apple trades today.
Key to her increased confidence in Apple stock is a bet that the Apple Watch will be successful. More specifically, she predicted (viaFortune) that Apple will sell 30 million of the devices in its first year. This would be a record initial product launch for Apple, more than doubling the 14.8 million iPads sold in its first year. Hubetys estimate for Apple Watch sales is higher than the current consensus analyst estimate for 22.6 million unit sales in 2015.
One of the most interesting takeaways in Hubertys note is how she arrived at her estimate for 30 million Apple Watches in calendar 2015.While this figure might initially seem extraordinarily high, putting it in perspective within a percentage of Apples user base brings the prediction down to Earth.
We believe looking at penetration into the Apple installed base yields the most realistic assessment of demand potential of the Watch. Huberty explained. Our 30M unit estimate implies 10% penetration into Apples 315M iPhone 5 or newer installed base exiting 2014, which is lower than iPad penetration of 14% in its first year but higher than iPhone at 7%.
In other words, Huberty expects Apples massive base of loyal customers will be a key driver in propelling the largest adoption of any new product the company has ever launched.
Apple Watch. Image source: Apple.
While Hubertys methodology seems sensible, we are likely still no better off than monkeys with a dartboard when it comes to predicting the devices success. Fortunately, Apples conservative valuation means Apple shareholders wont have to play the guessing game for now.A successful launch for the Apple Watch or not, the stock looks worth holding.
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Daniel Sparksowns shares of Apple. The Motley Fool UK owns shares of Apple.We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
