Sanford Bernstein's Toni Sacconaghi: Health Monitoring Capabilities Can Drive Sales Of Apple Watch In The Long Run

Toni Sacconaghi from Sanford Bernstein recently wrote a report on Apple Inc. (NASDAQ: AAPL) titled "Could it sell a billion watches?"

He was on CNBC Wednesday to discuss what could limit the sales of Apple Watch in the near-term and what could make it a winner in the long run.

Limiting Factor

"In the near-term, I think we have largely been below most people's expectations for the Watch in large part because we think there are two key limiting factors," Sacconaghi said. "The first is that it really doesn't fully work unless you have your iPhone with you and the second being that the battery life is very limited. So, we think that is likely to potential limit initial interest."

Value Proposition

He continued, "I think when we look longer-term and hence the provocative title ‘Could They Sell A Billion Watches?' Our belief is that as we move in to successive generations of the Watch, 3, 4, 5 years from now, this moves from being a discretionary consumer item to potentially a health monitoring device that is essential for all people and if ultimately Apple is able to put in that capability and deliver it as a Watch, that could be a very, very powerful value proposition for consumers and really result in hundreds of millions of units of sales."

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Not Just A Watch Story

Sacconaghi was asked what impact will the watch have on Apple's stock. He replied, "You are seeing the stock come off a little bit since the announcement because there really was not that much that was incrementally provided as far as information or utility to the watch."

"But I think ultimately Apple is not just a watch story. I think in the near-term we expect incremental capital returns and I think one of the things that's underappreciated about Apple over the next 3 to 6 quarters is that gross margins will continue to go up," Sacconaghi concluded.