Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 101

Why the Apple watch is disruptive

A lot has been said about all the fun things the Apple watch can do for you (show you the gain on your stock portfolio, let you know when your Uber car is close) and very little on the information you provide to it, like reading your vital signs and suggesting a movie or retail therapy when your biometric data says you are low. It’s this trove of highly personalised data which has Apple and the app development community salivating: remember, you don’t have to buy the internet (ie it’s ‘free’) because it’s the internet which is selling you. And think about how Facebook started as a personal communication tool, but is now very highly-prized as an advertising platform.

Apple has said that it won’t sell your data, and that is true, to a point. Apple doesn’t sell data on you, or your friends, family, location etc. But platforms like Google, when accessed on their devices, do.

Apps include more data about you

Few people have ever really turned their minds to the question of why so many companies push their apps rather than just their web experience, but the reason is that when the app is chosen, it just about always includes much more data about you than just the web version. You can confirm this is the case by reading the terms and conditions (you knew there was a reason you should read these, right?)

Which brings us back to the biometric data. It’s early, obviously, to be making accurate predictions of what the Apple Watch means, disruption-wise, but the hard-heads in Apple have already made available the system developer kit to app designers so they can work out how to milk your biometric data.

And just like Instagram, Facebook, Google and the like, the real commercial value of the Apple watch will be in the new types of data which it makes available. What sort of data? How excited or tired you are (through the heart rate monitor), and how active you are. How would this be useful? Very active people could get a discount on their health insurance, with insurance companies using it as a marketing tool to pick up new customers.

Or how about this? Excitement levels during movies and television shows. What makes you sweat, and your heart race, and when do you feel sad during a movie or television programme. Who wants this? Well, obviously movie and television programme producers. The in-built microphone on the watch knows (through media recognition app Shazam) what programme you are watching, and when (replay, live etc), and your reactions to it. Or how about medical device companies which want to monitor your sleep patterns to provide better quality, more expensive sleep apnoea masks which work with the data the watch provides. And how about the medical research groups which require large scale, prolonged data to assess particular aspects of health?

The point is not to try and work out the different iterations of the applications themselves. Significant resources will almost certainly be devoted to this, with Apple helping to drive the process. The point is that the watch, strapped as it is to your skin, makes available a slew of data on you that has never really been available before. And it’s this data which is likely to form part of the next wave of disruption.

Of course, to the consumer, it will just be a sexy new gadget, with functionality including a pay-wave through Apple Pay, talk and text, a buzz function to get you along to the next meeting, and all the rest of the interesting, convenient and fun stuff. And that’s half the point. It has to be a must-have device in the first place to become meaningful in the installed-base sense, at which point it can become a mass marketing tool like a biometric version of Google or Facebook. And then the disruption starts.

The market will judge its success

What’s it worth on the Apple stock price? The average predicted sales from Wall Street analysts is 23.25 million Apple watches sold. At around US$1000 each (there are gold watches being sold too) that works out at $23.3 billion in sales. Assuming a gross margin of 40%, this would be pre-tax earnings of US$9.3 billion, which at the company’s multiple of 9.9x (yes, it's less than Telstra, as we noted here) works out at US$92 billion, or US$15.80 per share – this is the value already built in to the stock price. If the watch fails, the Apple stock price will fall by at least that much. And the stock won’t really move if there is a perception that 23 million units is the correct number for first year sales. But if it is ahead of that, the stock will pop, with each 23 million units worth an incremental US$15.80 per share. A little over 10% a share. And that could get your heart racing …

 

Alex Pollak is CEO of Loftus Peak, a fund manager that specialises in listed global portfolios for SMSFs. Disclosure: The author and Loftus Peak clients own Apple shares. This article is general information and does not consider the personal circumstances of any investor.

 

  •   20 March 2015
  • 1
  •      
  •   

RELATED ARTICLES

CBA, AUSTRAC and our Orwellian privacy laws

Three main challenges to online ads and ‘surveillance capitalism’

banner

Most viewed in recent weeks

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Four best-ever charts for every adviser and investor

In any year since 1875, if you'd invested in the ASX, turned away and come back eight years later, your average return would be 120% with no negative periods. It's just one of the must-have stats that all investors should know.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

Preparing for aged care

Whether for yourself or a family member, it’s never too early to start thinking about aged care. This looks at the best ways to plan ahead, as well as the changes coming to aged care from November 1 this year.

Our experts on Jim Chalmers' super tax backdown

Labor has caved to pressure on key parts of the Division 296 tax, though also added some important nuances. Here are six experts’ views on the changes and what they mean for you.        

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Latest Updates

Investment strategies

LICs vs ETFs – which perform best?

With investor sentiment shifting and ETFs surging ahead, we pit Australia’s biggest LICs against their ETF rivals to see which delivers better returns over the short and long term. The results are revealing.

Retirement

The growing debt burden of retiring Australians

More Australians are retiring with larger mortgages and less super. This paper explores how unlocking housing wealth can help ease the nation’s growing retirement cashflow crunch.

The ASX is full of broken blue chips

Investing in the ASX 20 or 200 requires vigilance. Blue chips aren’t immune to failure, and the old belief that you can simply hold them forever is outdated. 

Shares

Buying Guzman y Gomez, and not just for the burritos

Adding high-quality compounders at attractive valuations is difficult in an efficient market. However, during the volatile FY25 reporting season, an opportunity arose to increase a position in Mexican fast-food chain GYG.

Investment strategies

Factor investing and how to use ETFs to your advantage

Factor-based ETFs are bridging the gap between active and passive investing, giving investors low-cost access to proven drivers of long-term returns such as quality, value, momentum and dividend yield. 

Strategy

Engineers vs lawyers: the US-China divide that will shape this century

In Breakneck, Dan Wang contrasts China’s “engineering state” with America’s “lawyerly society,” showing how these mindsets drive innovation, dysfunction, and reshape global power amid rising rivalry. 

Retirement

18 rules for ageing well

The rules to age successfully include, 'the unexamined life lasts longer', 'change no more than one-eighth of your life at a time', 'nobody is thinking about you', and 'pursue virtue but don’t sweat it'.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.