Will Apple’s iWatch Be the Next iPad?

Source: iWatch Concept by Todd Hamilton

Source: iWatch Concept by Todd Hamilton

Apple’s (NASDAQ:AAPL) rumored iWatch could match or surpass the sales numbers that the Cupertino-based company achieved with the iPad, according to a recent analysis done by UBS’ Steven Milunovich. In a research note obtained by Apple Insider, Milunovich predicted that Apple could sell as many as 21 million iWatch units in fiscal 2015 and 36 million units in fiscal 2016. Apple sold almost 19.5 million units of the iPad during its first year of availability and 47.6 million the following year.

Assuming an average selling price of $300 and an initial product margin of about 25 percent, the UBS analyst believes that Apple could rake in an additional $6.5 billion in revenue during fiscal 2015. Milunovich expects that Apple will eventually boost its product margin to above 30 percent, allowing iWatch revenue to reach $11 billion in fiscal 2016. “The iWatch could be 30-40bps dilutive to overall margins, resulting in an EPS boost of $0.15 in F15E EPS and $0.30 to F16 estimate or 1-2 points of EPS growth,” wrote Milunovich in his research note, according to TheStreet.

However, Milunovich cautioned that his sales estimates for the iWatch were based on best-case scenarios and that there were many unknown variables about a wrist-worn wearable tech product. “We expect iWatch sales to roughly track iPad unit sales — similar penetration rates would mean higher sales. [The] iWatch might do better because the customer base is larger than when iPad launched and the ASP might be less,” wrote Milunovich, according to Apple Insider. “On the other hand, iWatch is the first product to be worn, which might not appeal to all users.”