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Apple Beefs Up Audio, to Launch Upgraded Devices in 2019

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Apple (AAPL - Free Report) is likely to bring a premium version of AirPods, new HomePods, wireless charging case AirPower and over-ear headphones as early as 2019, reports Bloomberg.

The upcoming AirPods with noise cancellation are also likely to be water resistant. Moreover, the company is also expanding its healthcare offerings by adding biometric sensor such as a heart rate monitor to next gen AirPods. The earbuds are anticipated to be costlier than the current version, which is priced at $159, adds Bloomberg.

On the production side, the tech giant is reportedly switching away from Inventec by expanding its partnership with Foxconn Technology Group. Per Susquehanna, Cirrus Logic (CRUS - Free Report) will provide noise cancellation for the new AirPods.

We believe the launch of these upgraded versions will help the company expand its foothold in the wearables market where it already enjoys a huge support.

Focus on Wearable Expansion

Apple is focused on expanding its ecosystem and the launch of new features is expected to help it retain its users. Moreover, its focus on strengthening its other segments is leading to a steady recurring revenue stream for the iPhone maker.

We note that the last reported quarter was an outstanding one for Apple’s wearables business, which includes Apple Watch, Beats and AirPods. Combined revenues grew nearly 50% on a year-over-year basis. Management notes that the wearables business is now the size of a Fortune 300 company.

Notably, unit sales of both Apple Watch and AirPods set a new record for the March quarter. Moreover, wearables and home products accounted for more than 90% of the total growth in the Other Products category.

In the last fiscal, the segment generated sales of nearly $13 billion driven by rising demand for its accessories.

By beefing up audio devices, Apple will be able to better compete with other players in the market like Amazon (AMZN - Free Report) , Bose and Sennheiser.

We note that Apple’s brand is something that gives it an edge over its competitors. Apple commands a strong user base with exceptional brand loyalty. It is widely perceived that Apple users refuse to switch to any other platform that does not run on iOS.

Zacks Rank and a Key Pick

Apple currently has a Zacks Rank #3 (Hold).

A better-ranked stock in the broader technology sector is NVIDIA Corporation (NVDA - Free Report) , having a long-term earnings growth rate of 10.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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