“The gross profit margin for the Apple Watch is below Apple’s company average but has the potential to well exceed that average, UBS said in a research report Wednesday,” Patrick Seitz reports for Investor’s Business Daily.
“Based on a teardown analysis of the smartwatch, UBS estimates that the product’s gross margin initially will be about 34% but could rise to 57% when it hits an annual volume of 40 million to 50 million units,” Seitz reports. “UBS is modeling for 31 million units in fiscal 2016, which starts Sept. 27. Apple said that it expects the Apple Watch’s gross margin will be below the corporate average of about 39% in the June quarter. Apple’s gross margin was 40.8% in the March quarter.”
“UBS estimates the initial gross margin on the entry-level Sport version of the Apple Watch to be 21% to 23%, including start-up costs. It estimates the midrange Apple Watch to have a margin above 45%,” Seitz reports. “UBS predicts that Sport models will make up 65% of Apple Watch sales, with midrange watches at 35% and luxury Edition models at a fraction of sales.”
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MacDailyNews Take: Mid-range Apple Watch sales will likely increase with subsequent Apple Watch generations as a significant percentage of early adopters aren’t buying the Sport for its lightweight sport use, but rather simply as an inexpensive entry into Apple Watch. Once they decide that they love the Apple Watch via their first generation Sport models, a significant percentage will opt for the mid-range Apple Watch on their next go ’round.