Back to top

Image: Bigstock

Apple Needs the Series 2 Watch to Sell Well, But Will It?

Read MoreHide Full Article

At its highly anticipated keynote event on Wednesday, Apple (AAPL - Free Report) unveiled the Apple Watch Series 2, the second generation of its smartwatch device. The Series 2 boasts a plethora of new features, and the tech giant will hope the new product can reinvigorate slumping Watch sales.

Weak Sales

Apple is firmly in control of the smartwatch market, but that doesn’t mean that Apple Watch sales have lived up to expectations. The company remains tight-lipped on specific sales numbers for the device, but it did say at Wednesday’s keynote that it is number one in worldwide smartwatch sales.

Nevertheless, a report from the International Data Corp (IDC) in July claimed that Apple Watch sales fell 55% in the second quarter. With global smartwatch sales falling 32% in the same time period, Apple definitely took a brutal hit, especially as competitors like Lenovo (LNVGY - Free Report) and Samsung saw sales increase by 50% in the quarter (also read: IDC Says Apple Watch Shipments Drop 55%).

Why have Apple Watch sales been slumping? Well, a variety of factors go into its worldwide sales performance, but it seems reasonable to assume that customers are either uninspired by the device or opting for a competitor’s version of the smartwatch.

To remedy both of these problems, the Apple Watch Series 2 needs to be innovative, unique, and affordable. Now that Apple has officially announced the product, we can look to see whether the company has successfully tackled those three points.

Series 2 Features

The new generation of Apple Watches will include a dual-core processor that promises to be 50% faster than the original version. It also boasts a 2x brighter screen, making it Apple’s brightest display to date. To help improve movement tracking, the Series 2 will feature a built-in GPS, and the new device will “learn” about you through a new algorithm that tracks your daily activity. Design wise, there will be new cases, including aluminum, stainless steel, and ceramic, as well as new watch bands.

Perhaps the “coolest” new feature of the Series 2 is its water-resistant capabilities. Apple promises that the watch will be “swim-proof,” meaning it can handle depths of up to 50 meters. Almost no other major smartwatch manufacturers have a swim proof option, and even Fitbit’s fitness trackers can’t be brought into the pool.

Apple also announced a partnership with Nike (NKE - Free Report) ; executives from the fitness apparel giant were on-hand Wednesday to announce the Apple Watch Nike +, a fitness-focused version of the new smartwatch that makes it easier to incorporate into workouts and encourages users to go on runs and be active.

Alongside the announcement of the Series 2, Apple announced its latest Watch-based operating system, Watch OS3. The new OS will allow users to swipe the edge of their device to switch watch faces, and it will include new animated stickers, custom reply scribbling, improvements to typing, an activity sharing app, and an “SOS” app.

Once again, pricing remains a concern with the Series 2. The new version starts at $369, while the Series 1 will receive a processor upgrade and will retail at $269. In comparison, Fitbit’s Blaze is just $199 and Samsung’s Gear S2 starts at $249.99.

Bottom Line

With worldwide smartwatch sales slumping significantly in the second quarter, the demand for these types of devices is at a low right now. That means that any new product entering the market must be competitive in both design and price.

The Apple Watch Series 2 is now the most powerful smartwatch on the market and its swim-proof capabilities are unparalleled. With that said, it’s still a very pricy device, and many of its comparable competitors are more affordable.

This doesn’t feel like the outright win that Apple needed to ensure long-term Apple Watch success, but it should inspire some shoppers heading into the holiday season. I expect Apple to be more open about its Watch sales if things do pick up, so investors should pay attention to that.

For more coverage on Apple’s keynote this week, check out the latest episode of the Zacks Friday Finish Line podcast:

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 DaysClick to get this free report >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Apple Inc. (AAPL) - free report >>

NIKE, Inc. (NKE) - free report >>

Lenovo Group Ltd. (LNVGY) - free report >>