How the Apple Watch Stands a Chance With Teenagers in the Race For Wearables

SAN DIEGO, CALIF. (TheStreet) -- What will it take for Apple's (AAPL) newest invention, the Apple Watch, to find its way on to the wrists of today's youngest consumers? Perhaps just a little creative marketing and a whole lot of cool points.

Tuesday, Apple showed off a new category of mobile device it expects to carry the company into the future. A mix of fashion of function, the Apple Watch will retail starting at $349 and offer consumers a variety of smartphone-inspired functions including email, messaging, notifications, maps, photos, activity-tracking sensors, and apps, all in miniature form.

Slated to arrive early next year, the Apple Watch will enter an unproven wearable market (one that's expected to be worth $60 billion by 2018, according to research firm IHS) and will need to do the seemingly impossible: convince consumers, especially young ones, of the value of wearing an expensive smartwatch on their wrists. Though a growing number of people are amenable to wearables like fitness bands, such as those made by Fitbit or Jawbone, just 5% of U.S. consumers plan to buy a smartwatch in the next year, according to a study by the Acquity Group. That could change dramatically, however, as 25% of consumers plan to own one in the next five years, the study found.

Like many adults, teens aren't entirely sure what to make of the Apple Watch, though interviews with senior high school students in one AP Calculus class suggest that the influential bunch could be enticed to pick one up if the wearable develops a reputation as "shiny and cool" among their peers -- and if their parents are will willing to fork over the money, of course.

Following Apple's event, Evercore Partners research analyst Rob Cihra noted that Apple could sell 15 million units of the Apple Watch in fiscal 2015, generating $5 billion in sales, a number that could grow to $8 billion by 2016. "We see key design tenets and biz goals of Apple's Watch making it a truly 'personal' and so sticky device (e.g., glancing notifications, customizable look, health tracking)," Cihra wrote in a note. He rates shares "overweight" with a $115 price target.

None of the 30 students interviewed, 70% of whom own iPhones, said they had previously paid much attention to wearables, nor do any of them own a smartwatch now. Surprisingly, around half of the class indicated that they currently wear a regular watch.

After watching Apple's promotional video on the Apple Watch, roughly 40% indicated they wanted to own the device. While watching the video, the students appeared to be wowed by the watch's variety of bands, its ability to send and receive animated emoji, and the device's "cute" heartbeat animations. The watch's hidden strength, at least with this group, appears to be in its frivolity.

"It's really cool and convenient," Vi, a high school senior, said in an interview. She already owns an iPhone 5s and loves Apple products.

Seventeen-year-old Liam, another self-professed Apple fan, said that he was especially impressed by the user interface and Digital Crown. "It's different from a phone ... and more personalized to you," he said, indicating that he would be inclined to buy one if the Apple Watch was waterproof (it's technically just water resistant).

Though several other youngsters had their own special requests -- Michael, for instance, said a camera would make the watch desirable -- most weren't as descriptive as Liam. Collectively, however, they agreed that if the watch was considered cool, in the most general of senses, then they would want one.

For many, the Apple stamp may prove cool enough. Although Morgan Stanley analyst Katy Huberty believes the initial press reception on the Apple Watch to be "mixed," she still expects robust sales in the first year. "[W]e continue to see 30-60M units in the first year based on the initial penetration of prior Apple devices into its user base, comparing favorably to investor expectations for minimal financial impact," Huberty wrote in a note.

With price a deciding factor among this demographic, Apple could have a chicken-and-egg problem on its hands when it comes teens. Teens will only buy the watch if its cool, but the watch can only be considered cool if youngsters buy them.

There's still good news for Apple, even if the Cupertino can't turn its watch into a must-have accessory for today's youth. Knowing very little about the distinctive features of the iPhone 6 and 6 Plus, a majority of students really wanted one just because it was "faster" and "newer."

--Written by Jennifer van Grove in San Diego, Calif.

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