I just got the first meaningful sales projections concerning the launch of the iWatch.
Although no release date has been announced, investment firm, UBS, says to expect sales of 21 million iWatch units in the first year alone, and 36 million more in the second year.
Apple sold 19.5 million iPads in the first year on the market. However, the iWatch market is ultimately expected to be much bigger.
The device is rumored to be launching in October, ahead of the holiday season.
With a $300 price tag and profit margins of 25%, it deserves our immediate investment attention.
Besides, the launch is sure to create a huge buzz. And hype alone can drive prices in the short term, as we’re currently witnessing with stocks of World Cup host, Brazil.
So let’s deconstruct the iWatch to determine what pick-and-shovel plays are ready to blast higher as the launch draws near. Hint: One company in particular jumps off the page…
First-edition iWatches will come in both men’s and women’s models.
The male iWatch version will feature a 1.66-inch display.
The female model will have a 1.33-inch display.
While that’s not particularly exciting news on its own merit, here’s what is…
The displays will be made entirely of scratch-resistant sapphire, and account for roughly 24% of the sapphire market’s yearly demand.
Apple has already established itself as a leader in the sapphire industry supply chain through its relationship with sapphire producer, GT Advanced Technologies (GTAT).
Wall Street Daily’s Chief Technology Analyst, Marty Biancuzzo, reports that Apple and GT have been expanding their sapphire-production operation ahead of the big iWatch launch.
GT runs the world’s only sapphire production factory. Its Mesa, Arizona facility now has 1,700 running production furnaces, up from 950 a few months ago.
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When you combine mushrooming worldwide sapphire demand with the launch of the iWatch, the investment thesis for GTAT seemed airtight.
I mean, the fact that the company ended the first quarter with a $609-million order backlog is proof-positive for the inherent demand for its products, right?
Upon closer look, however, Apple had already pre-paid for most of the increased sapphire production ahead of the inaugural iWatch launch.
In the end, despite iWatch sales being projected to double in the second year, GTAT recently went bust, filing for bankruptcy.
I rank GTAT’s collapse up there with the most shocking bankruptcies of the last 25 years.
Bottom line, it’s really hard to partner with Apple on anything and fail.
Yet GTAT managed to make it look easy.
Onward and Upward,
More Storylines Impacting Markets
A Magical Transformation
April durable goods orders in the United States increased by an unexpected 0.8%, which Wall Street experts interpreted as evidence of continued growth in an otherwise anemic economy. But a look at the details shows a different story altogether.
The April durable goods order would have shown a decline of 0.8% if it weren’t for an enormous $17.6-billion order for 10 new nuclear-powered attack submarines for the U.S. Navy during the month.
This record order of submarines magically transformed an otherwise disappointing April durable goods order into an upside surprise. The Navy contract increased defense orders from $9.3 billion in March to $12.89 billion in April – a 38.6% change. Actual government spending on the subs will be spread out over the next five years.
Lack of Confidence in Stocks
The S&P 500 averaged 1.8 billion shares traded per day in May, the lowest average number of traded shares since 2008. This, in turn, resulted in only 20 of the S&P 500 companies reaching their 52-week highs in May.
That’s the lowest number since February 2013, and is a warning sign that stocks may see significant resistance from current levels.
Since 1990, there have been four occurrences when the S&P 500 set a 52-week high with fewer than 10% of companies reaching fresh highs on lower than average volume. In all but one occasion, the S&P 500 experienced a 5% or greater correction. Tread carefully!