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JPMorgan slashes Apple Watch estimates in half, lowers stock target

Not wild about the Apple Watch's potential? Neither is JPMorgan.

Analysts at the investment bank slashed their Apple Watch estimates for fiscal 2016 to 11.9 million unit shipments from 23.5 million, adding they see the wearable only penetrating 7 percent "of its addressable base by the end of 2017 vs. previous assumption of 15%."

Rod Hall, one of JPMorgan's analysts, told CNBC's "Fast Money: Halftime Report" on Thursday that "we've seen demand weakness on that watch below what we had anticipated. We think it's a great product; it's just that the traction for these watches, people still haven't figured out what they want to use them for."

JPMorgan released a note to clients Thursday lowering its Watch estimates, as well as its price target on Apple shares, to $105 from $125.

In the note, JPMorgan said the new price target is based on a valuation of 10 times price-to-earnings, excluding cash. "At this valuation, Apple is at a discount to peers trading on an average of 12.7x. We believe challenging short term fundamentals are likely to drive the stock lower until expectations are reset to the current macro reality."

"We believe that Apple has plenty of additional growth drivers that can propel earnings in 2017. However, macro demand weakness looks set to challenge fundamentals in 2016 vs. consensus expectations. This potential weakness in numbers is offset by an inexpensive valuation and the likelihood that 2017 is a significantly better year in our opinion," the note said.

Apple (AAPL) traded slightly higher on Thursday, above $97 a share, and is nearly 8 percent lower for 2016.

AAPL in 2016

Source: FactSet

Disclosure: JPMorgan makes a market in Apple stock.

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