When the Apple Watch product line rolls out on Friday, it might not sell at the level of Apple’s latest iPhones -- at first. But in the long run, the wearable tech could be among the company’s most profitable products ever, one analyst believes.
Apple Inc. could sell more than 3 million units of the Apple Watch and yield revenues of more than $2 billion in the first two weeks of sales, according to Think Big Analytics market researcher Carl Howe. He thinks sales will break down like this: 1.8 million units of the Watch Sport, 1.3 million units of the stainless steel Watch and 40,000 units of the 18-karat gold Watch Edition. He predicts that the while the Apple Watch will sell fewer units than the Sport model, it may actually lead in revenue with $900 million versus the Sport’s $675 million. And if 40,000 Editions sell, that could bring in around $500 million in sales.
“My belief is that the Apple Watch product line will become Apple’s most profitable product line ever, with gross margins exceeding 60 percent,” Howe wrote in a blog entry. His reasoning? While there are different material choices for each tier of watch, the core electronics are the same for all models. And when factoring in the different band choices, the costs are much lower than the premium price charged for the bands. In comparison, Apple’s average gross margin per product hovers at between 39 and 40 percent, according to company filings.
Though there are reportedly 38 case and band options for the Apple Watch, stock appears to be constrained for the debut on Friday. That was deliberate, Howe contends. The analyst believes Apple kept first shipments small so stores didn't end up having tons of stock sitting around.
Howe’s projections are among many that have come ahead of Apple Watch shipments, which will begin this Friday in nine countries, including Australia, Canada, China, France, Germany, China, Japan, the U.K. and the U.S. Apple Watch Sport starts at $349, the stainless steel Apple Watch starts at $549 and the gold Edition starts at $10,000.