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Apple Stock Will Rise as More iPhone Users Buy AirPods and Watches - Barron's

Photograph by Josh Edelson/AFP via Getty Images

Well, here it is, Apple’s next big thing.

In case you missed it, Apple (ticker: AAPL) has been showing huge growth in its wearables business, thanks to the growing success of both AirPods and Apple Watch. In its quarter that ended in September, the company posted revenue of $6.52 billion, up 54.4% since 2018.

And Apple’s wearables business is just getting started.

Evercore ISI analyst Amit Daryanani asserted Monday morning that wearables could be a $60 billion-plus business for Apple by fiscal year 2023, adding $2 a share to earnings per share.

Daryanani foresees more than 20% growth in wearables, driving more customers into Apple’s iOS ecosystem and “accelerating growth even if iPhone sales remain flat,” he writes.

The analyst estimates that Apple Watch was 52% of sales in the company’s broad wearables category in the September 2018 fiscal year, with Airpods accounting for 26% of sales. (The category also includes HomePod, Apple TV, Beats headphones and iPod Touch.) But he thinks Airpods will be the largest Wearables product going forward.

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Daryanani estimates that there are 75 million Apple Watches and 50 million AirPods in use—or less than 10% of iPhones for either product. He therefore expects “continued high growth as iPhone owners become buyers of AirPods and Apple Watch.”

The analyst repeats his Outperform rating on the shares and lifts his price target to $275, from $262. As Apple shares continue their year-long rally, blowing past Street target prices, analysts are scrambling to update their targets.

At a recent check, Apple was up slightly at $265.93.

Write to Eric J. Savitz at eric.savitz@barrons.com

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