Apple Watch Revenues – Various Scenarios

The Apple Watch will soon be available (24 April) and investors in Apple are curious as to what affect the smartwatch will have on income. I  address that question in my Seeking Alpha article. Here I present the background data for several scenarios.

Each scenario is presented as a percentage split between the 3 Apple Watch collections: Apple Watch/Sport/Edition.

The column labeled Percent indicates the percentage of Units that model sold. Given the base and maximum prices for each collection (max. not shown here) I have estimated and Average Sales Price (ASP).

The column % of Total Value shows the percentage of total Revenue generated by the particular model, using the ASP to extend the number of units for each 1 million units total sales for all models.

From here, we can generate an overall ASP (in the yellow box). With this it is easy to calculate the expected revenues for any figure for total unit sales.

Pessimistic Estimate:

This represents the most pessimistic case – with only 1% of purchases being for the Apple Watch Edition. Obviously, there are more pessimistic possibilities yet. A pessimistic case would also select a low number of units sold. My lowest is 6 million. It seems incredible to me that Apple would sell less than that by year’s end. It would have to be awful, and I am sure that is not the case.

Pessimistic Projection

 

Conservative Estimate:

Here is what I consider a rational, conservative estimate, with 5% Edition sales.

Conservative Projection

MDN Poll Estimate:

MacDailyNews did a poll, and I have pulled their figures for the next estimate: 56/35/9.

 MDN Projection

MDN Poll UPDATE Estimate:

The original poll was before Apple announced prices, including the $10,000 and up for the Edition collection. But more people have replied since then. So I took the difference between the two polls creating new stats. With 495 respondents, the sampling is not trivial. Of course it come with all the caveats I outlined in the original article.  DO SEE that article for a full discussion.

It is not surprising that the percentage of buyers opting for the Edition models dropped significantly from 9% to 6%.

MDN NEW Projection

BetaNews Poll:

Joe Wilcox at BetaNews ran a similar poll. The big difference was that his included those who do not intend to buy any Apple Watch. I pulled the numbers just for those who would be buying and recalculated percentages to match the other scenarios. Even so, he came up with only 4% of buyers opting for the Edition collection. To me this is not at all unreasonable. This is one out of every 25 buyers. To me even that seems like a lot of people to spend $10,000 and up.

BetaNews Poll

Moderate Estimate:

My moderate estimate is another realistic option with just 6% opting for the Editions.

Moderate Projection

 

WSJ News Report Estimate:

The Wall Street Journal reported that Apple was building 5 to 6 million units for launch, with one half of them in the Sports Collection, two-thirds of the remainder Apple Watch collection, and the rest the Edition collection. Even with rounding down, that would mean 16% Edition model, or 1 out of every 6 sold. Given the price of $10,000 and up, this seems a very high ratio. On the other hand, it might be right for initial sales, and then drop later.

WSJ Report

 

 

Uber-Pessimistic Estimate:

I am adding one more scenario a super pessimistic case in which the Edition collection watches take only a 1/1,000 share (o.1%). Thus, for sales of 6 million units, there would be only 6,000 high end Edition watches sold. After all, WHO is going to spend $10,000 on a smartwatch?

Interestingly, even at 0.1% of unit sales, the Edition would provide 3% of gross revenue.

Uber-Pesssimistic Scenario

 Summary

Here we have seen the full details of the different scenarios. You can pick your favorite ratio of sales and see an ASP.

NOTE: In the Seeking Alpha article, I also go over the methodology in detail.

Please let me know what you think in the comment section below.


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