“Apple began taking orders for its watch on Friday. The watch can range from mere technological marvel to a masterpiece of precious metal, depending on one’s budget,” Jonathon M. Trugman writes for The New York Post. “If you spend some time looking at the numbers, even a year of boffo sales may do little to move Apple’s stock price. Evidence: Apple’s share price since its much-anticipated early-March announcement of the digital timepiece. It’s flat — down 4 cents.”
MacDailyNews Take: That is not evidence. There are other factors at work on Apple’s share price (dividend/buyback speculation, short interest, a mere two weeks to earnings, the macroeconomy, etc.) than simply Apple Watch.
“For almost any other company, a new-product launch that sells $2 billion dollars’ worth in its first year would be a home run — heck, a grand slam. Initial estimates for the Apple Watch range from 7.5 million units to a high of 31 million watches in year one,” Trugman writes. “Assume an average selling price of, say, $500… And we generously presume Apple will sell 10 million to 15 million watches the first year. That equates to $5 billion to $7.5 billion in revenues. If we charitably extrapolate Apple’s net-profit margins of 21.6 percent to this new, design-heavy product, we come up with $1 billion to $1.6 billion in net profit.”
“It’s important to recognize that Microsoft, IBM or Google would kill to have this kind of success,” Trugman writes. “However, for Apple, it’s barely a tick. Last fiscal year, which ended in September 2014, Apple posted $182 billion in sales and realized $39 billion in net income. In other words, the Apple Watch is financially a rounding error to Apple — much like the Beats acquisition, which also was cool, had good media buzz and generated lots of excitement, but is completely inconsequential and immaterial financially.”
MacDailyNews Take: The fruits of the Beats acquisition (iTunes Music, not sales of overpriced bass-heavy headphones) have not yet been revealed, so it’s entirely premature to refer to that acquisition as “inconsequential and immaterial financially.”
“The sheer size of Apple’s buyback — $56 billion in 2014 — along with the iPhone’s massive 41.3 percent US smartphone market share, will dictate where the stock goes,” Trugman writes. “Whether the watch is a success or a flop, it will move the second hand on Apple’s stock price for but a minute.”
Full article here.
MacDailyNews Take: Watching the reactions to yet another blockbuster success from Apple is often interesting and telling.
Apple Watch first-day pre-orders estimated near 1 million – April 13, 2015
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Apple Watch pre-order shipping estimates stretch into summer – April 11, 2015
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Here are the dates you can expect to get your Apple Watch – April 10, 2015
Apple Watch on fire as Apple sells out fast – April 10, 2015
Apple Watch draws strong turnout at Apple Retail Stores – April 10, 2015
Apple Watch already sold out – April 10, 2015
Open thread: Did you get your Apple Watch preorder placed? – April 10, 2015