Apple has a 'huge opportunity' to break the watch into its own market: Tech analyst

Rene Ritchie, Tech Analyst, joins Yahoo Finance’s The First Trade with Alexis Christoforous, Brian Sozzi and Dan Howley to discuss Apple’s new offerings. Ritchie also weighs in on the Snowflake IPO.

Video Transcript

ALEXIS CHRISTOFOROUS: We have our eye on Apple today. Tim Cook and company unveiled two new watches, two new iPads, and a bigger push into services that could give Peloton a run for its money.

Tech Analyst Rene Ritchie is joining us now. Good to see you, Rene. So I want to start with these new watches and get your thoughts. They look pretty sleek. They also have this, I guess, life-saving component to them. And I'm wondering just who Apple is targeting with these new watches?

RENE RITCHIE: So I think, unlike the phone market which is near saturation, the watch market is still wide open. Most people don't have a computer watch, don't have an Apple watch. And that means if they can add features that are compelling on the high end and keep driving down prices in the mid-range and low end, I think they have a huge opportunity not just to up-sell iPhone owners, but to start breaking the watch into its own market going forward.

BRIAN SOZZI: Rene, certainly lots to touch on here on Apple, but I do want to quickly pivot to Snowflake, awaiting the first trade here today. Based on your knowledge of what they do, do they have the type of technology that warrants a stock that could go up, I mean, the opening day trade could come up pretty hot here?

RENE RITCHIE: Sorry. I missed that. I apologize.

BRIAN SOZZI: No, no. Rene, we were asking about the-- about Snowflake. You know, we're waiting for the first trade right now. Do they have the type of technology that warrants this very premium valuation they're getting?

RENE RITCHIE: I think with emerging technologies, there's always an excitement that overcomes the technology at first, and it's hard to evaluate it until you see it sort of proven in the market. Early adopters often get a brief reward and then get punished by an incumbent over time. So I don't have enough information to call on that yet, but I'm interested to see where it goes.

DAN HOWLEY: Hey, Rene, I just want to see, you know, as far as the Fitness Plus app goes, it's $9.99 a month. You're going to get a lot of access to different trainers. It's kind of positioned as almost a Peloton fighter. But I guess in the long run, do you see this being sticky for a company like Apple? And do you think that, you know, as more individuals buy the Apple watch, because there's still, you know, a lot of room to grow there, do you think that it's going to be one of the kind of marquee services that they offer?

RENE RITCHIE: Yeah, absolutely. I think, in general, the services play was broader than I expected it to be. The rumors leading up to it were that it was going to be a very small savings, and it turned out to be a much better deal than that. You do have to have an Apple watch to use it. And obviously, there's a smaller install base of Apple watch than there is of iPhone, or even iPad at this point.

But especially now when people are stuck at home and when we start traveling again, the ability to have all of that type of instruction right with you, I think, is going to be compelling to a large amount of people, especially as, again, a value add to Apple's existing products, where, at a certain point, you can't charge more for items, but you can start adding extra services to them, and thereby increase the amount each customer's paying for the overall services they're getting.

DAN HOWLEY: And I guess as far as those overall services go, you know, we're looking at Apple obviously trying to diversify its revenue. They've been doing that over the past years, increasing the amount of revenue brought in by services. Is this-- the bundle, the fitness, is this where we're going to continue to see them going? And I guess, where else may they start to kind of lay their heads as far as services go in the future?

RENE RITCHIE: Yeah, I think they're incredibly well-funded, so it's just about sort of picking their shots. And we've heard rumors of them working on satellite systems. And we've already seen Elon Musk get heavily involved in that. And as you go down the line sort of assimilating all the things that add value to their services, whether that is some form of cellular or broadband connectivity for Apple users, or just continuing to knock down one service after another, be it getting Apple TV to the point where it's much more competitive with Disney Plus and Netflix, and moving now into VR services, and maybe a great-- game streaming service, because Microsoft and Sony have more compelling offers than Apple does with their Arcade service right now.

ALEXIS CHRISTOFOROUS: Rene, I want to get your thoughts on the new iPads. They do have better displays. They are more powerful. But anything groundbreaking there that you think is going to get-- have people rushing out to-- to upgrade or go out and buy a new iPad?

RENE RITCHIE: What surprised me there was just how aggressive they were willing to be with what's the-- essentially, the mid-tier iPad. They gave it the new processor before the iPhone got it, and that hasn't happened in 10 years. And also, they gave it so many of the features that are found in their pro-level iPad, which is $200 to $300 more expensive that I think it makes it a very compelling offer.

And I think they see the iPad-- they saw a small boom in iPad sales with things like stay-at-home, work-at-home, those sorts of things. And they want to put their foot on the gas and try to get people who might buy the lowest end iPad, which is the most popular iPad, to see this as a worthwhile upgrade, and, again, just get a little bit more money from each of the customers.

BRIAN SOZZI: Rene, news out this morning that Apple-- Amazon is getting into podcasts, you know, and Apple yesterday getting into fitness. Do you think ultimately these are just tests on the part of both these companies before they go out and make acquisitions-- Apple buys a Peloton, Amazon buys a Spotify?

RENE RITCHIE: You know, I think it's likely. I think, you know, there's an argument to be made that not every company has to do everything, and that's the usual pushback you get on Apple, or Google, or Amazon announcing these things. And I've been podcasting for 10 years. I have a high level of affinity for sort of the indie roughshod podcast market.

But sort of like Netflix, when all the content becomes a commodity and everyone has the same shows or everyone has the same music, the podcasts become the differentiator. And we've seen large amounts of money go to Joe-- to Joe Rogan and others already. And I think Amazon, with their audible service, particularly, is really well-positioned to-- to get further into podcasts and offer that as a big value add, sort of like they do with Prime Video today.

DAN HOWLEY: Rene, I just want to kind of go back to your comment on gaming. You know, Apple has Apple Arcade-- excuse me-- Apple Arcade. Mobile gaming is one of the largest gaming segments in the world, and it continues to grow. It's more accessible than a console or a PC.

Mac doesn't have really the kind of audience for gaming that PC has. And obviously, you know, we have the Xbox Series X, PlayStation 5, the Nintendo Switch out there. I guess, what can Apple do to push further into the very lucrative gaming market beyond Apple Arcade? And do you expect them to do that with something like a cloud-laced-- excuse me-- cloud-based platform in the future?

RENE RITCHIE: So I think there's two ways they can go there. Right now Apple has been really content with the casual gaming market, where they don't have to put in a lot of effort like you do with hardcore games. But the vast majority of money is made there because everybody pays-- plays "Candy Crush." But I think now that they're moving to Apple silicon on their Macs, which are basically slightly adjusted version of the iPad chips, you'll be able to run iPhone and iPad games on the Mac.

And I think they're going to surprise a lot of people with how powerful their graphics are, even compared to incumbents like AMD's new Navi 2 and Nvidia-- and Nvidia's new Ampere lineup. And once you get all the iOS style games onto the Mac, then it's just a matter of building that out. My only question is whether they do a lot of first-party things, which I think they would need to do to become attractive to hardcore gamers, or if they just ease up restrictions and make it easier for Xbox xCloud, Game Pass, and for Sony systems to stream games on their platform sort of become the hub for where everyone streams everything from.

ALEXIS CHRISTOFOROUS: All right, we're going to leave it there. Tech Analyst Rene Ritchie, good to see you.

RENE RITCHIE: Good to see you, too. Thank you.