Apple Inc.’s (AAPL) so-called “other” products, which include its Apple Watch, AirPod wireless earbuds and HomePod, its voice-activated speaker, are forecasted to surpass the iPad as a contributor to revenue.
That’s according to Guggenheim Investments, the investment firm that rates Apple at buy and has a $215 price target on the stock, implying it can gain nearly 30%. Analyst Robert Cihra said in a research report covered by Barron’s that its “other” products will hit $22 billion in sales in 2019, up from $11 billion in 2016. Cihra said it will become Apple’s fourth-biggest contributor to its revenue this year, hitting $19 billion and representing 7% of revenue. The iPhone is the main driver of revenue, with its services business and Mac computers second and third. The ancillary category will also push the iPad aside in terms of contributing to overall revenue, relegating it to fifth place. (See also: Google Overhauling Android OS to Lure iPhone Users.)
Breaking it down by product line, Cihra expects the Apple Watch to account for $9.5 billion or about half of the “other” revenue, shipping 22 million units this year, while the AirPod earbud will sell around 23 million units in 2018, hitting $3 billion in sales with Apple’s overall wearable tech sales reaching $13.8 billion this calendar year. Cihra expects the HomePod to ship 3 million units in the current year and have revenue of $1 billion. “Primarily a Siri/Apple Music cloud-access device today, the HomePod nevertheless has a real brain,” wrote the analyst. “A HomePod MINI could follow and we expect its price-point to signal whether Apple ultimately sees smart speakers more as a profit center or defensive Siri/AI beachhead.”
Applause for Apple
Guggenheim isn’t the only one upbeat about Apple’s prospects in the coming years. Warren Buffett's Berkshire Hathaway Inc. (BRK.A) increased its position in the Cupertino, Calif., technology powerhouse, ending 2017 with a stake that was increased by 23%. The iPhone maker is now Berkshire’s largest stock holding, pushing Wells Fargo & Co. (WFC) out of the top spot. Buffett has been acquiring shares of Apple since 2016.
Meanwhile, with the stock market whipsawing between steep losses and gains since the start of February, Bank of America Merrill Lynch has been pounding the table on Apple’s stock, arguing in a recent research report that it's a good way to weather the volatility in the stock market. (See also: Apple Is a Safe Bet Amid ‘Market Turmoil’: BofA.)
“In times of market turmoil, we turn to large cap stocks with low leverage, high cash balance, and attractive valuation. Apple offers all this as well as opportunities for future growth," wrote BofA analyst Wamsi Mohan in a note to clients last week. He noted that Apple’s cash position will enable it to continue to grow.