“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.
Related articles:
Apple Watch first-day pre-orders estimated near 1 million – April 13, 2015
Apple likely to quickly ramp up Apple Watch production – April 13, 2015
Apple Watch pre-order shipping estimates stretch into summer – April 11, 2015
Apple Watch sold out in minutes; didn’t preorder in time, how’s June sound? – April 10, 2015
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
You can’t go wrong with AAPL stock. In fact, going along with apple also proves well. For example, as soon as I found out Walgreens was the only store of its class accepting Apple Pay, I poured some cash into their stock and earned a 36.8% return.
The article is right about its main point. If Apple is on its way to selling up to 200 million iPhones a year then all its other businesses are going to be individually dwarfed by that.
That does not mean their smaller businesses are insignificant strategically or when summed together. Just that their revenues are not so important as how they expand the iOS ecosystem. Ecosystem expansion is an indicator of how much marketshare Apple will continue to gain in the future, despite a maturing smartphone market.
Things look good on that front, just as Apple continues to grow its Mac sales via marketshare despite the very mature PC market.
Assuming Apple soon releases a significant AppleTV update with new user interface modes, they could increase 2015 vs. 2014 revenue quite a bit.
Don’t forget that through the eyes of an analyst, selling 200 million iPhones per year would be a bad thing because they would claim that that Apple will be over-dependent on just one product line.
Some of you might recall that many years ago, similar things were said about Apple’s over-dependence on iPods, but Apple seems to have solved that particular problem.
So long as Apple continues doing the opposite of what analysts want, I’m happy to be a shareholder.
Gotta love the ’rounding error’ reference (I hope Ballmer read this one today), but this guy, like most people, has it all wrong. The Apple watch is SIGNIFICANT, dummy.
One thing not mentioned here is the halo effect. It’s entirely possible that the Watch will actually sell more iPhones. This should not be underestimated.
More iPhones and other Apple devices. The Halo effect continues apace and makes a huge contribution analysts conveniently ignore. Why not have ALL your devices work together instead of just two?
If there was truth in advertising the headline might read as such: “Apple Watch worth more in hype than profit, and this article isn’t worth much.”
He can’t even get the basics right: “Apple’s stock price is driven by the engineers in the C-Suite, with a large assist from activist shareholder Carl Icahn.”
Whore street is a totally independent animal, and from what I know, unlike Apple Whore street is run by the same driving force that runs the modern day united states of america.
Fear.
Samsung, Windows, Hillary Clinton, Android, ISIS, Microsoft all suck donkey schlong.
You forgot Ebola.
Maybe, and Baltimore Ravens, too, but I was just jealous of others and wanted a hunnert down votes like them. Let’s get with it troll-bots, I ain’t got all day.
And all the Apple Watch news and AAPL is down a little and Gaagle and Microcent are both up a little; go figure.
When he talks about “insignificant and immaterial” – either in relation to the WATCH or the beats acquisition – he is talking about the bottom line impact, not the contextual significance.
Beats’ purchase price of $3 billion looks massive as money goes, but is relatively insignificant compared to Apple’s profits and trends. Likewise, the first year WATCH sales, in terms of impacting the bottom line, would also be insignificant compared to Apple’s whole.
That doesn’t make either of the of insignificant significance – and the writer didn’t imply that. Fanboys need to calm down and up their reading comprehension.