We have a $125 price estimate for Apple, which is slightly ahead of the current market price.
Apple’s ecosystem effect and the large base of affluent iPhone users
Airpods enable users to listen to music or phone calls wirelessly, much like other Bluetooth headphones in the market, while also providing deeper integration with Apple’s product ecosystem. For instance, the headphones offer a seamless pairing process with Apple’s iDevices, the ability to access Apple’s digital assistant Siri, and provide longer wireless range and battery life when paired with Apple devices. Apple’s ecosystem effect and the large base of affluent iPhone users could provide a sizable target market for the Airpods. Moreover, the relatively accessible $159 price tag and Apple’s wide distribution footprint should make Airpods fairly easy to cross-sell to iPhone customers, who typically pay upwards of $650 for their smartphones.
Estimating The Revenue Opportunity
While Apple is unlikely to disclose sales figures, we believe that it should be able to ship roughly 22 million Airpods in the first year, assuming an attach rate of 10% with the iPhone. We believe this figure is reasonable, as Barclays projects initial production figures at 10 to 15 million units. Assuming an ASP of $159, this would translate into revenues of roughly $3.5 billion in 2017.