Apple Bolsters Its Fast-Growing Wearables Business With a New Apple Watch

Apple's (NASDAQ: AAPL) iPhone and services segments may get most of the attention from investors these days, but don't underestimate the potential of the tech company's smaller and more nascent business: wearables. Wrapped into Apple's wearables, home, and accessories department, wearable products have been helping this segment grow faster than any of the company's other revenue categories.

Not one to pass up an opportunity to capitalize on the strong demand it is seeing for wearable products, the tech company announced a new version of its Apple Watch on Tuesday.

"We've seen Apple Watch have a meaningful impact on our customers' lives and we're excited to deliver even more capabilities with Apple Watch Series 5 and watchOS 6," said Apple chief operating officer Jeff Williams in a press release about the new product.

Here's a look at the latest version of Apple Watch -- and why it matters.

Apple Watch Series 5 with a new case material made of titanium

Apple Watch Series 5 with a new case material made of titanium. Image source: Apple.

Meet Apple Watch Series 5

One year after the launch of its Apple Watch Series 4, which featured a larger display, louder speakers, and an improved processor, among other upgrades, Apple is launching a fifth generation of the device.

Like its predecessor, the Apple Watch Series 5 starts at $399, and the version that includes cellular capabilities starts at $499. Meanwhile, Apple seems to have discontinued its Apple Watch Series 4 and is lowering the starting price of its Apple Watch Series 3 to just $199.

Differentiating the Series 5 from previous Apple Watch generations are its wider selection of materials, an always-on Retina display, new location features, and international emergency calling.

Here are the details:

  • Always-on Retina display: The display can remain on at all times, intelligently dimming when a user's wrist is facing down.
  • Navigation: A built-in compass includes the ability to see heading, incline, latitude, longitude, and current elevation.
  • International emergency calling: Users with the cellular version of the Apple Watch Series 5 can make international calls to emergency services, no matter where the service was activated and even if they haven't yet activated a cellular service.
  • An all-new titanium shell: In addition to the aluminum, stainless steel, and ceramic options for the Apple Watch's casing, the device is also available in an all-new titanium.

"Apple is introducing a new case material made of titanium, a prized material in watchmaking that has superb strength-to-weight ratio and is lighter than stainless steel," said Apple in its press release about the newest version of the watch. "Available in two beautiful brushed finishes, the natural titanium has a custom-engineered surface which helps maintain its color and resist staining, while the space black titanium achieves its deep color from a diamond-like coating (DLC)."

A key catalyst

In Apple's most recent quarter, Apple's wearables, home, and accessories segment grew faster than any other segment. Revenue in the category jumped 48% year over year. This compares to 13% growth for Apple's second fastest-growing segment, services. But when you dig down into the catalysts for the wearables, home, and accessories segment's recent performance, wearables (a revenue category including Apple Watch, AirPods, and Beats products) have been the stars of the show.

It was an "absolutely blow out quarter for wearables where we had accelerating our growth of well over 50%," said Apple CEO Tim Cook during the company's fiscal third-quarter earnings call. In addition, Cook said Apple Watch had a record fiscal third quarter, with more than 75% of customers who bought the Apple Watch buying it for the first time.

A new Apple Watch will help Apple keep up its strong momentum as it heads into the important holiday season.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: short January 2020 $155 calls on Apple, long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, and long January 2020 $150 calls on Apple. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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