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Apple Rides on Wearables, Rumored to Launch Watch Series 4

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Apple (AAPL - Free Report) will reportedly launch Watch Series 4 in the third quarter of 2018, per KGI analyst Ming-Chi Kuo, as reported by 9to5Mac.

The new generation of the Apple Watch is speculated to have a 15% larger display, trendy design, enhanced sensors for health monitoring beyond heart rate and longer battery life. Moreover, a drop in the prices of older versions is also anticipated.

All these factors are expected to set new records for Apple Watch sales, which is one of the fastest growing segments of the company.

Per KGI estimates, about 22-24 million units of Apple Watch will be sold 2018, which indicates year-over-year growth of nearly 30%. Kuo projects Watch sales to reach 50 million units a year, in the long term.

Apple Watch — A Key Growth Driver

Per NPD’s latest report, Apple was the leading player in the wearables market in 2017 driven by the rising demand for Apple Watch. Per Canalys, more than 18 million units of Apple Watch were sold in 2017, up 54% from 2016.

In the last reported quarter, Apple Watch revenues grew 50% year over year for the fourth consecutive quarter. Sales of Apple Watch Series 3 were more than twice of what Series 2 recorded a year ago.

Per Canalys, Apple’s shipments grew more than 32% year over year to 8 million in the December quarter, which is “the highest ever number of shipments in a single quarter, not just for Apple, but for any wearable vendor.”

In fact, wearables was the second largest contributor to Apple’s revenue growth after iPhone, registering 70% year-over-year improvement. In fact, the segment recorded a new all-time high with revenues of more than $5 billion for the first time in a quarter.

Per International Data Corporation’s latest estimates, the overall wearables market is expected to witness CAGR of 18.4% from 113.2 million shipments in 2017 to 222.3 million in 2021. The firm also expects Apple Watch to lead the smart watch category, which is expected to witness CAGR of 22.7% from 2017-2021.

With the new device, Apple will be able to maintain its competitive position against other players in the fitness wearable market like Fitbit , Samsung Electronics, Xiaomi and Garmin (GRMN - Free Report) .

Earlier this month, Fitbit launched a modern fitness tracking device — Fitbit Versa, which is more akin to Apple Watch 3 and Samsung Gear Sport.

Zacks Rank and Stock to Consider

Apple carries a Zacks Rank #3 (Hold).

A better-ranked stock in the broader technology sector is Facebook Inc. , carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Long-term earnings growth rate for Facebook is projected to be 25.9%.

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