Apple Watch To Become More Profitable Than IPhone: CLSA

Apple Inc. is facing continued supply constraints that could weigh on watch sales and margins this calendar year, but Apple Watch is expected to eventually become Apple's most profitable product category, even above the iPhone, according to CLSA analyst Avi Silver. Higher-than-expected costs to develop the watch plus supply constraints will impact near-term unit growth, said Silver, who lowered his fiscal 2015 Apple Watch forecast to 16 million from 20.5 million previously. But Apple Watch is eventually expected to have "very positive margin" contribution, and Silver left his 2016 unit estimate unchanged at 35 million. He also left his EPS estimates largely unchanged, saying the troubling Apple Watch launch should be mostly offset by stronger-than-expected iPhone demand, particularly in China. Shares of Apple closed up 1.9% to $132.04 on Wednesday. They traded down 0.5% in premarket trade on Thursday. They're up 48.1% over the last 12 months, outperforming the broader Dow Jones Industrial Average, up 9.2%.