These two new products could benefit the tech giant this holiday season and in 2021.
Apple (NASDAQ:AAPL) continues to beef up its product lineup as it heads into the holidays. On Tuesday morning, the tech giant shared updates on two new major products. The company announced its first-ever Apple-branded over-ear headphones and it provided a date for the launch of its new Peloton (NASDAQ: PTON)-like fitness subscription service.
Here’s a look at why both of these new products could prove to be meaningful catalysts for Apple.
Capitalizing on AirPods’ momentum
AirPods have been a huge hit for Apple, playing a key role in the rapid growth of the tech company’s wearables business.
Apple launched its first Apple-branded headphones, the in-ear AirPods, in September 2016. The product has enjoyed immense success since its launch, and Apple is estimated to sell 82 million AirPods this year. AirPods and Apple Watches have helped Apple’s wearables business grow to the point that if it were a company, it would rank as No. 130 in the Fortune 500.
With so much momentum in wearables, it’s not surprising to see Apple double down on headphones by bringing to market a new AirPods device: AirPods Max — an over-ear headphone product with active noise canceling.
The pricey headphones will set buyers back $549 — more than double the $249 price tag of Apple’s AirPods Pro. AirPods Max come in five new colors: space gray, silver, sky blue, green, and pink.
With a price tag like this, the product could garner a profit margin that exceeds iPhone profit margin. If the product sees even a fraction of the success the original AirPods and the AirPods Pro saw, the new device could meaningfully boost Apple’s financials.
Joining the Peloton craze
Apple also said on Tuesday that it is launching Apple Fitness+ on Dec. 14. The new video-based workout subscription service, which connects with Apple Watch to integrate personal metrics during exercises, comes as Peloton is demonstrating a substantial market for this type of service.
In Peloton’s most recent quarter, connected fitness subscriptions soared 137% year over year to more than 1.33 million. Paid digital subscriptions skyrocketed 382% year over year to 510,000. Much of this momentum undoubtedly comes from the fact that consumers are sheltering at home due to the pandemic. Still, the company was growing rapidly last year as well. For the three-month period ending Dec. 31, 2019, Peloton saw connected fitness subscribers jump 96% year over year. Subscription revenue spiked 107% over the same time frame.
The launch of Apple Fitness+ not only provides an incremental revenue opportunity for the company, but also strengthens the overall Apple ecosystem that keeps customers engaged and ultimately leads to future product purchases.
Both of these products bolster Apple’s potential going into the holidays and headed into 2021. AirPods Max, in particular, could be a meaningful driver for the company’s earnings if the product’s high price tag isn’t too much of a deterrent to interested buyers.
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