Top analyst says Apple Watch sales will fall this year and the new model won't help

One of the most accurate Apple analysts, KGI Securities' Ming Chi Kuo, issued a note on Monday with bad news for anyone hoping for a big Apple Watch update later this year.

The Apple Watch 2 will be an "S" update and its external design will be largely unchanged, according to reports.

Even worse, Kuo predicts that Apple will only sell 7.5 million Apple Watches in 2016, down from his estimate of 10.6 million sold in 2015 after the smartwatch launched in April. (Market research firm IDC estimated that Apple sold 11.6 million watches in 2015.)

Kuo has a great track record for predicting future products among Apple analysts, mainly because he has sources in Apple's supply chain in Taiwan, China, and other east Asian countries. Most recently, he nailed major details of the recently launched iPhone SE.

Kuo's note comes at a time when Apple's wearable faces questions about whether it can become a major computing platform. Having sales fall in its second year won't help. Both software developers and users are hoping that a second-generation product can help address some of the annoyances they've discovered on the first version of the Apple Watch.

Kuo's note contradicts a report last week from Apple analyst Brian White at Drexel Hamilton, who believes that Apple Watch 2 will have a hardware redesign, and will be 20% -40% thinner than the first version. He also indicates it's possible that Apple will launch its second smartwatch this June, at its developer conference, as opposed to in the fall alongside the iPhone 7.

Kuo believes that production on the Apple Watch 2 will start in the third quarter, indicating a launch in September or October. He believes the device will have "better connectivity," which could mean it gets a wireless modem for cellular service, which is on many users' wish lists.

Apple cut the price of its entry level watch to $299 from $349 last month.

Most recently, Ming Chi Kuo predicted that the iPhone coming out in 2017 will get a major redesign, with a bigger, better screen.