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Influential technology analyst Toni Sacconaghi said Apple could sell 1 billion watches as the device becomes an indispensable device for monitoring our health.
"Long term we are increasingly intrigued about the possibility of the watch evolving from a discretionary consumer offering to an essential health-monitoring device—i.e., one that could possibly save lives," wrote the analyst in a report entitled "Apple: Could it sell a billion Watches?" sent to clients Monday. "If this were the case, Apple's Watch could be big—really big."
Bernstein's Sacconaghi, who has had an "outperform" rating on Apple since 2011 when it was $82 a share, predicts the stock will rise 6 percent to $135 over the next 12 months.
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While this declaration may be the kind of "pie in the sky" prediction that marks a peak in euphoria around a company and a top in the stock, the analyst does temper his uber-bullish thesis with very tame expectations for initial sales of the watch, which was formally unveiled Monday by Apple.
"We worry that limited battery life and the need for an iPhone to be near the watch to ensure full functionality may limit initial appeal. However, we note that few people initially predicted how successful the iPad would become, but its attractiveness was shaped by compelling use cases created by app developers. Ultimately, the same kind of upside opportunity may exist for the watch, particularly as successive generation devices offer fewer limitations."
Bernstein projects 7.5 million units sold in the second half of 2015 and 20 million sold in 2016. That's far from 1 billion and on the low side of a Wall Street consensus that expects Apple to sell 20 million to 40 million watches in the first four quarters of it going on sale.
His mild outlook jibes with a tepid market reaction for the tech giant after product releases. Five days after a day like Monday, when Apple releases a new product, the stock trades, on average, 1.5 percent lower, according to quantitative tool Kensho, as investors wait for sales figures to come out. The stock may come under increased pressure this time around as the watch is a big question mark relative to the last few releases of new iPhones.
But then the analyst goes on to describe a scenario where the watch becomes an official medical device, perhaps even needing approval from the Food and Drug Administration. Apple could add functionality to make the device a 24-hour doctor that monitors blood pressure, heart rate, glucose levels, blood-alcohol makeup and stress levels as well make it a real-time warning system for emerging health issues like heart attacks.
"In such a case, we believe that Apple would see the watch's addressable market expand significantly, and interesting associated possibilities would exist around consumers sharing their data with insurance companies, physicians, etc."
Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.