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Latest Canalys Data Shows Apple Leading the Wearables Market

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Apple (AAPL - Free Report) remains the leading player in the wearables market, courtesy of Apple Watch.

According to recently released Canalys data, shipments of wearables grew 35% in the first quarter of 2018. Apple’s shipments were the highest at 3.8 million, driven by Watch Series 3 and the addition of LTE.

Chinese company, Xiaomi came second, selling 3.7 million units of wearable devices. Mi Band devices accounted for 90% of total shipments.

Both Apple and Xiaomi held 18% market share in the quarter. The other three in the top five list, having a mixed portfolio of fitness wearables, were Fitbit (FIT - Free Report) , Garmin (GRMN - Free Report) and Huawei with market share of 11%, 7%, and 6%, respectively.

Apple Watch Grabs the Lion’s Share

Per the report, smartwatches generated 80% of wearable band revenues with 43% of shipments. Basic bands, representing 57% share of shipments, contributed only 20% to revenues.

Notably, Apple represented 59% of sales in cellular-enabled smartwatch market, the firm adds. Garmin came second with 1 million units of smartwatches sold in the last quarter. Fitbit’s wearable band shipments consisted 24% of smartwatches.

In terms of revenues, Apple is the clear winner, given the higher priced smartwatches it sells. However, competition in the space is expected to intensify if Alphabet’s (GOOGL - Free Report) Google comes up with a similar offering, which is currently lacking in the Android ecosystem, adds Canalys senior analyst, Jason Low.

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

More Room for Growth

Apple Watch revenues showed double digit year-over-year growth in the last reported quarter. Unit sales of Watch also reached a new high in the fiscal second quarter. On the conference call, CEO Tim Cook added that the company’s wearables business is almost the size of a Fortune 300 company.

Apple Watch’s popularity is also growing among teenagers, which is evident from the recently released Piper Jaffray’s Taking Stock with Teens survey.

Per the survey, Apple Watch is the most preferred smartwatch among teens. Reportedly, out of the 20% respondents who own a smartwatch, 15% own the device, up from 12% in the fall 2017 survey. Samsung Gear stands second with merely 2% of the respondents owning the watch.

Apple will reportedly launch Watch Series 4 in the third quarter of 2018, per KGI analyst Ming-Chi Kuo. 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 prices of older versions is also anticipated.

Per KGI estimates, about 22-24 million units of Apple Watch will be sold in 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.

Is Google the New Challenger?

Apple Watch’s position might come under threat with a new offering from Google, which is rumored to launch a Pixel smartwatch at its October hardware event.

Qualcomm (QCOM - Free Report) has also recently confirmed that it is working on a new wearable chipset for Wear OS smartwatches. Per Pankaj Kedia, Qualcomm's senior director of Wearables, the new smartwatch chip “will significantly change the Wear OS ecosystem.”

Moreover, the reason behind Google’s rebranding of Android Wear title to Wear OS in March 2018 was to make people understand that the wearables operating system is for everyone and not just Android users.

Per the company, one out of three Wear OS users is an owner of an iPhone. The company is therefore trying to lure iPhone users by making the features work seamlessly on the device.

Zacks Rank

While Garmin currently carries a Zacks Rank #2 (Buy), Apple and Google carry a Zacks Rank #3 (Hold). Fitbit carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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