Wearables have easily become one of Apple’s most exciting market opportunities, and CEO Tim Cook says the segment is now “exploding.” According to Cook’s estimates, Apple’s wearables business currently generates about $18.9 billion in revenue. Market research firm IDC recently estimated that global sales of wearables as a whole nearly doubled in the third quarter.
As 2019 draws to a close, Apple could sell AirPods worth $6 billion a year. That number could more than double by 2020.
In a recent research note to investors, Toni Sacconaghi, an analyst at Bernstein, a Wall Street investment bank, predicted that Apple’s revenue from AirPods would reach $6bn in 2019. The analyst believes AirPods sales could more than double to 85m in 2020, with sales of $15bn, or about 3.5 per cent of Apple’s expected revenue for the same year.
The tech giant released its second-generation AirPods in March, followed by the $249 high-end AirPods Pro in October. Apple has also launched other wearabledevices that use the Beats brand.
But on the other hand, while AirPods are extremely popular and growing rapidly, sales could soon peak. “Once at the top of the curve, growth tends to slow sharply, and AirPods are growing so fast that they are likely to peak during the record period, ” says Mr Sakarnai. ”
The analyst also believes that some users who bought second-hand iPhones may be reluctant to pay $159 for an AirPods headset. Apple said earlier this year that it had 900m iPhones installed worldwide. About 250 million of the iPhones still in use were purchased in the second-hand market, which could limit the upside potential of The AirPods, Mr. Sazaknagi said.
“Given the unusually steep adoption curve for AirPods and the rapid saturation of the iPhone user base, we expect AirPods revenue growth to slow sharply to single digits or even lower levels by 2021 or 2022,” Mr. Sanazi wrote in the report. ”
Bernstein’s forecast contrasts sharply with that of Gene Munster, an analyst at Loup Ventures, who has long tracked Apple’s movements, and who recently estimated that it is based on 59.9 million pairs of sales and an average price of $142. AirPods could generate $8.5 billion in revenue for Apple in 2019. Munster’s forecast model suggests that Apple will sell 95.8 million AirPods for an average price of $159 by 2020, generating $15.2 billion in revenue.
In the study, Bernstein reiterated his “market perform” rating and a $250 target price for Apple shares, which is lower than Apple’s current share price.