Bernstein Raises AAPL Target to $120 on Apple Watch Potential

Apple's entry in the smartwatch market won't come until spring 2015, but Bernstein analysts are already raising their target price for the company's stock from US$110 to $120 based on the Apple Watch's potential. The investment firm sees higher App Store margins thanks to Apple Watch apps, and that's going to help drive revenue even higher.

Apple Watch has investors excited about Apple's potential in 2015Apple Watch has investors excited about Apple's potential in 2015

Apple Watch was unveiled in September and touted as a health and fitness tracker that's also an iPhone accessory. It includes sensors to track steps as well as heart rate, displays messages and lets users respond, shows turn-by-turn directions, offers fitness suggestions based on user habits and activities, and will support third-party apps.

While Apple Watch is expected to sell well, it's the potential for new revenue from those third-party apps that caught Bernstein analyst's attention. Apple Watch owners will no doubt want to enhance their smartwatch's functionality, and Apple is diving developers the coding tools they need to make that happen.

There's more in Apple's mobile space that will give the company a financial boost in 2015, too, thanks to Apple Pay — the mobile payment system that lets iPhone 6, iPhone 6 Plus, and Apple Watch owners use their device as their credit card.

Apple Pay officially launched only a couple weeks ago and has already seen wide spread popularity. iPhone 6 and 6 Plus owners have taken to the Web proclaiming they want to shop only where they can use Apple Pay, and companies that don't support the NFC-based mobile payment system are seeing pressure to get on board.

Apple Pay is currently available only for iPhone 6 and iPhone 6 Plus owners, but that will change once Apple Watch ships. iPhone 5, 5s, and 5c will support Apple Watch, so they can get in on the Apple Pay action, too.

Along with its new $120 target price, Bernstein is maintaining its Outperform rating for Apple's stock. Apple is currently trading at $113.21, up 1.96 (1.76%).

[Thanks to TheStreet for the heads up]