Apple Watch Series 9 Ultra 2 sales halted US Impact marginal say analysts

Apple to stop selling Apple Watch Series 9 and Ultra 2 in the U.S. following patent infringement ruling. Analysts expect minimal impact.

Apple (NASDAQ:AAPL) has reportedly made the decision to stop selling the Apple Watch Series 9 and Apple Watch Ultra 2 directly to customers in the U.S. starting this week. However, third-party retailers will still be able to sell any existing inventory. This decision comes after the International Trade Commission's (ITC) ruling in October, which upheld a previous judge's decision that Apple had infringed on patents held by medical technology company Masimo (NASDAQ:MASI) related to blood oxygen level measurement technology used in the latest Watch models.

It's important to note that the infringement excludes the SE line of Apple Watches. In response to the ruling, Apple plans to appeal the ITC's limited exclusion order, which prohibits the import and sale of Apple Watch models with blood oxygen sensing functionality in the U.S. This information was disclosed in the company's 10-K report.

Analysts at JPMorgan estimate that the ban could potentially impact around $5 billion of annual sales, which represents approximately 1% of Apple's total sales. However, they also note that the actual impact will likely be lower and will depend on the length of the ban and Apple's ability to redirect U.S. consumers to legacy models, particularly the Ultra 2 but to a lesser extent the Series 9.

Despite the potential impact, analysts believe that the financial effect on Apple will be "marginal." Additionally, a separate article in the Wall Street Journal states that Apple plans to appeal the ruling and has requested that the U.S. government overturn the decision as part of the commission review process. The Biden administration has until December 25 to potentially veto the import ban.

According to analysts at Bank of America, the Apple Watch currently holds approximately 50% of the smartwatch market. They anticipate a prolonged legal battle between the involved parties. Additionally, they estimate that the Apple Watch accounts for around 5% of Apple's annual revenues and approximately 3% of its earnings per share.