According to a report from Citigroup (C) analyst Oliver Chen, the global market for watches is projected to generate more than $60 billion in sales in fiscal 2013. Chen argues that while that’s smaller than the pool of revenue that comes from TVs, gross margins on watches, which are expected to be primarily driven by resurgence in demand for growing popularity of innovative models, are about 60 percent. That’s 4x bigger than for televisions, according to Anand Srinivasan, a Bloomberg Industries analyst.
If executed correctly, an Apple watch could gain market share in the growing watch industry. Headway in the business, which is an aspect Apple is quite familiar with as the company prides itself on knowing what the people want before they do, would help compensate for slowing growth and lower margins in the Cupertino’s most important business segments, such as iPhones and iPods.[via Bloomberg] “This can be a $6 billion opportunity for Apple, with plenty of opportunity for upside if they create something totally new like they did with the iPod — something consumers didn’t even know they needed,” said Chen, who covers luxury-goods retailers at Citi.
The TV industry is forecast to generate nearly $120 billion in sales this year, according to market-research firm IHS Electronics & Media. Bberg notes that by using Chen’s margin estimates, “a 10 percent share for Apple in each market would mean gross profit of $3.6 billion for watches, outstripping $1.79 billion for TVs.”
Success in the watch business could provide some relief for Apple’s stock. The ticker is currently trading below the $430 range in pre-market/Monday, more than a 30% nosedive from the company’s high of $705 per share in September 2012.