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Will Apple Watch Shipments Register a Decline this Year?

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There are fresh estimates regarding the shipments of Apple’s (AAPL - Free Report) first wearable device- Apple Watch. A recent report from KGI investment forecasts that in 2016, Apple Watch shipments might decline by as much as 25% over the last year.

An important thing to note here is that since Apple does not disclose the unit sales for its newer products, the KGI report estimates that Apple sold about 10.6 million Apple Watches in 2015. Based on this figure, the company projects a 25% decline in 2016 to 7.5 million units. Moreover, sales in 2015 were from the eight months of availability in the year (it was launched in Apr 2015), instead of the full twelve month prediction for 2016.

The analyst has indicated a couple of key factors that have been affecting demand. Firstly, the wearable market still at a nascent and is therefore likely to witness inconsistent demand. The analyst also believes that there should have been more interesting features and apps for Apple Watch in order to attract customers. Also, the need to tether it to an iPhone further limits its audience.

Apple had even cut the prices of Apple Watch at its last month’s event, which made investors wonder whether the move was meant to reinforce flagging sales. In fact, even in a nascent wearables market, Apple’s primary competitor Fitbit (FIT - Free Report) is seeing strong demand as indicated in a recent Morgan Stanley report.

However, since Apple has a strong brand value, a decent share of the premium user base and an overall strong ecosystem, it is difficult to say whether the company is facing sluggish demand or the price-cut was just a means to expand its user base.

Additionally, Apple is expected to launch a newer version of Apple Watch in the latter half of this year which can significantly boost demand, especially if it can integrate the novel ResearchKit and CareKit apps for its fitness-focused users.

Apple carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the broader tech space are Extreme Networks Inc. (EXTR - Free Report) and Ixia . Both these stocks have a Zacks Rank #2 (Buy).

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