Apple's New Smartwatch: Why Investors Should Care

| About: Apple Inc. (AAPL)

In its headquarters in Cupertino, Apple (NASDAQ:AAPL) is experimenting with wristwatch-like devices made of curved glass, according to people familiar with the company's explorations, who spoke on the condition of anonymity because they are not allowed to publicly discuss unreleased products. Serious reports about the imminent arrival of an Apple iWatch, a potential game-changer in the realm of wearable computing, are doing the rounds since yesterday.

Apple's stock, which has been languishing despite Apple's stellar fourth quarter financial performance, is expected to bounce back on the news. Investors would most likely embrace an iWatch, with some already saying that wearable computing could replace the smartphone over the next decade.

Apple's iWatch: A Potential Game-Changer?

Apple is experimenting with designs for its smartwatch that would perform some functions of a smartphone. The company has discussed such a device with its major manufacturing partner Hon Hai Precision Industry Company, better known as Foxconn.

"Such a watch would operate on Apple's iOS platform, two people said, and stand apart from competitors based on the company's understanding of how such glass can curve around the human body," The New York Times reports.

Why Investors Should Care

  • If smartphones do become smartwatches and smartglasses, Apple seems to have the technology to make standout wearable computers.
  • Apple's technology could progress to a point where consumers have a tablet plus wearable computers, like watches or glasses, which enable simple things like voice calls, texting, quick searches, and navigation.
  • These devices are likely to be cheaper than an iPhone and could ultimately be Apple's best answer to addressing emerging markets.

Benefits of an Apple iWatch

There have been numerous iWatch concepts that have surfaced in the past. Apple itself released an iPod nano that functioned as a watch; however, despite its popularity among many, it was replaced by a larger iPod nano last year. Here are some of the benefits of an Apple iWatch that Business Insider has summarized:

● Apple can solve the "having-to-remove-the-watch-from-your-arm-problem" by implementing wireless charging, which the company holds a patent for.
● Apple's patent for curved glass screens could help reduce the clunky factor.
● Siri will be able to handle complex tasks reducing the need for buttons or complicated menus.
● You could see who had called without needing to take out your iPhone.
● It could eliminate the need for typing in passwords on Apple devices.
● You may never lose your iPhone again because the iWatch will alert you if you start moving out of range.
● An iWatch could function as a fitness tracker using sensors to determine calories burned, miles traveled, and blood pressure.
● You could swipe an iWatch to make payments using NFC or other technologies.
● It would be great for music listening.
● The iWatch would work great as a remote control via Siri.
● Apple could use the iWatch to fix its maps by using crowdsourced pressure data.

Technical Picture: An Uptrend Imminent?

(Click to enlarge)

If Apple's stock could breach the 20-Day SMA at $472.55 on a closing basis, which is highly probable right now on the iWatch news, a short-term uptrend will be confirmed. A close above the 50-Day SMA, which is currently located near $510, will confirm that the uptrend is something more than just a short-term blip. The stock last traded above its 20-Day and 50-Day SMAs in the first week of October, last year when the downtrend started. I feel the stock will be in a steady uptrend very soon.

(Click to enlarge)

With VIX trading near multi-year lows, investor sentiment is extremely bullish since the beginning of the year. I expect the bullish trend will continue for some more time, and Apple will make a comeback with a vengeance. The iWatch news will certainly act as a positive trigger for the stock.

Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.