{"id":60927,"date":"2014-09-25T13:35:01","date_gmt":"2014-09-25T17:35:01","guid":{"rendered":"http:\/\/countingpips.com\/?p=60927"},"modified":"2014-09-25T13:35:01","modified_gmt":"2014-09-25T17:35:01","slug":"is-apple-watch-a-needle-mover","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/09\/is-apple-watch-a-needle-mover\/","title":{"rendered":"Is Apple Watch a Needle Mover?"},"content":{"rendered":"<div id=\"inves-199515004\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">September 25, 2014<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><h4><span style=\"font-size: small;\">By Adam J. Crawford, Analyst, <a href=\"http:\/\/www.caseyresearch.com\/go\/udpuw-2\/PIP\">caseyresearch.com<\/a><br \/>\n<\/span><\/h4>\n<p>The investment community has been up in arms over a lack of innovation from Apple. After all, the company hasn\u2019t launched a new product line in quite some time\u2026 that is, until now. Meet the company\u2019s brand-new smart device: Apple Watch. Investors hope the product will send Apple\u2019s stock to new heights. Is that wishful thinking?<iframe loading=\"lazy\" src=\"http:\/\/trk.caseyresearch.com\/f\/?content_id=1001&amp;code=PIP&amp;editorial=is-apple-watch-a-needle-mover-1\" width=\"1\" height=\"1\" frameborder=\"0\"><\/iframe><\/p>\n<p>Apple brings its new product into a hotly contested space, with the likes of Sony, Nike, and Samsung all offering a competing smartwatch. But there\u2019s a common theme with reviews for these gadgets: not enough features, not enough style. Apple aims to fill this void\u2026 and will charge a premium for doing so, of course.<\/p>\n<p style=\"text-align: center;\"><img decoding=\"async\" style=\"width: 351px; height: 347px;\" src=\"http:\/\/d1w116sruyx1mf.cloudfront.net\/ee-assets\/channels\/article_default\/140925imagewatch.jpg\" alt=\"\" \/><\/p>\n<p>Apple Watch will retail for $349, notably higher than most competing watches. Since Apple is notorious for putting the squeeze on retail margins (it reportedly allows retail as little as 3% on tablets), retailers would likely make 10% on the Apple Watch, placing Apple\u2019s revenue per watch at around $315.<\/p>\n<p>In 2013, Apple sold 150 million iPhones. It would be an extremely tall order to sell that many watches, especially at $350 a pop. So for a base-case scenario, let\u2019s say that 30% of iPhone buyers will purchase an Apple Watch. For a bullish scenario, 50%. And for a bearish scenario, 10%. Using these adoption rates yields the following annual unit sales.<\/p>\n<div align=\"center\">\n<table border=\"0\" cellspacing=\"0\" cellpadding=\"0\">\n<tbody>\n<tr bgcolor=\"#14B8E0\">\n<td valign=\"top\" width=\"321\"><strong>\u00a0<\/strong><\/td>\n<td align=\"center\" width=\"63\"><strong>Bear<\/strong><\/td>\n<td align=\"center\" width=\"63\"><strong>Base<\/strong><\/td>\n<td align=\"center\" width=\"63\"><strong>Bull<\/strong><\/td>\n<\/tr>\n<tr bgcolor=\"#F2F2F2\">\n<td valign=\"top\" width=\"321\"><strong>Percent of iPhone Sales<\/strong><\/td>\n<td align=\"center\" width=\"63\">10%<\/td>\n<td align=\"center\" width=\"63\">30%<\/td>\n<td align=\"center\" width=\"63\">50%<\/td>\n<\/tr>\n<tr bgcolor=\"#E2E2E2\">\n<td valign=\"top\" width=\"321\"><strong>Apple Watch Annual<br \/>\nUnits Opportunity (Millions)<\/strong><\/td>\n<td align=\"center\" width=\"63\">15<\/td>\n<td align=\"center\" width=\"63\">45<\/td>\n<td align=\"center\" width=\"63\">75<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>At a projected price of $315, we get the following projected revenues.<\/p>\n<p>&nbsp;<\/p>\n<div align=\"center\">\n<table border=\"0\" cellspacing=\"0\" cellpadding=\"0\">\n<tbody>\n<tr bgcolor=\"#14B8E0\">\n<td valign=\"top\" width=\"283\"><strong>\u00a0<\/strong><\/td>\n<td align=\"center\" width=\"98\"><strong>Bear<\/strong><\/td>\n<td align=\"center\" width=\"98\"><strong>Base<\/strong><\/td>\n<td align=\"center\" width=\"98\"><strong>Bull<\/strong><\/td>\n<\/tr>\n<tr bgcolor=\"#F2F2F2\">\n<td valign=\"top\" width=\"283\"><strong>Apple Watch Sales<br \/>\nas a percent of iPhone Sales<\/strong><\/td>\n<td align=\"center\" width=\"98\">10%<\/td>\n<td align=\"center\" width=\"98\">20%<\/td>\n<td align=\"center\" width=\"98\">50%<\/td>\n<\/tr>\n<tr bgcolor=\"#E2E2E2\">\n<td valign=\"top\" width=\"283\"><strong>Annual Units<br \/>\nOpportunity (Millions)<\/strong><\/td>\n<td align=\"center\" width=\"98\">15<\/td>\n<td align=\"center\" width=\"98\">45<\/td>\n<td align=\"center\" width=\"98\">75<\/td>\n<\/tr>\n<tr bgcolor=\"#F2F2F2\">\n<td valign=\"top\" width=\"283\"><strong>Price per Watch<\/strong><\/td>\n<td align=\"center\" width=\"98\">$315<\/td>\n<td align=\"center\" width=\"98\">$315<\/td>\n<td align=\"center\" width=\"98\">$315<\/td>\n<\/tr>\n<tr bgcolor=\"#E2E2E2\">\n<td valign=\"top\" width=\"283\"><strong>Revenue (Billions)<\/strong><\/td>\n<td align=\"center\" width=\"98\"><strong>$4.7<\/strong><\/td>\n<td align=\"center\" width=\"98\"><strong>$14.1<\/strong><\/td>\n<td align=\"center\" width=\"98\"><strong>$23.6<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>Over the past four years, Apple\u2019s profit margin has ranged from 19.2% to 26.7%. Let\u2019s assume a 23% profit margin on the Apple Watch. With shares outstanding of 6 billion and at Apple\u2019s current multiple of 15, here\u2019s our calculation of the impact on share price for each volume scenario.<\/p><div id=\"inves-2150281076\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>&nbsp;<\/p>\n<div align=\"center\">\n<table border=\"0\" cellspacing=\"0\" cellpadding=\"0\">\n<tbody>\n<tr bgcolor=\"#14B8E0\">\n<td valign=\"top\" width=\"200\"><strong>\u00a0<\/strong><\/td>\n<td align=\"center\" width=\"100\"><strong>Bear<\/strong><\/td>\n<td align=\"center\" width=\"100\"><strong>Base<\/strong><\/td>\n<td align=\"center\" width=\"100\"><strong>Bull<\/strong><\/td>\n<\/tr>\n<tr bgcolor=\"#F2F2F2\">\n<td valign=\"top\" width=\"200\"><strong>Revenue(Billions)<\/strong><\/td>\n<td align=\"center\" width=\"100\">$4.7<\/td>\n<td align=\"center\" width=\"100\">$14.1<\/td>\n<td align=\"center\" width=\"100\">$23.6<\/td>\n<\/tr>\n<tr bgcolor=\"#E2E2E2\">\n<td valign=\"top\" width=\"200\"><strong>Profit Margin<\/strong><\/td>\n<td align=\"center\" width=\"100\">23%<\/td>\n<td align=\"center\" width=\"100\">23%<\/td>\n<td align=\"center\" width=\"100\">23%<\/td>\n<\/tr>\n<tr bgcolor=\"#F2F2F2\">\n<td valign=\"top\" width=\"200\"><strong>Profit (Billions)<\/strong><\/td>\n<td align=\"center\" width=\"100\">$1.1<\/td>\n<td align=\"center\" width=\"100\">$3.2<\/td>\n<td align=\"center\" width=\"100\">$5.4<\/td>\n<\/tr>\n<tr bgcolor=\"#E2E2E2\">\n<td valign=\"top\" width=\"200\"><strong>Shares Outstanding<br \/>\n(Billions)<\/strong><\/td>\n<td align=\"center\" width=\"100\">6<\/td>\n<td align=\"center\" width=\"100\">6<\/td>\n<td align=\"center\" width=\"100\">6<\/td>\n<\/tr>\n<tr bgcolor=\"#F2F2F2\">\n<td valign=\"top\" width=\"200\"><strong>EPS<\/strong><\/td>\n<td align=\"center\" width=\"100\">$0.18<\/td>\n<td align=\"center\" width=\"100\">$0.53<\/td>\n<td align=\"center\" width=\"100\">$0.90<\/td>\n<\/tr>\n<tr bgcolor=\"#E2E2E2\">\n<td valign=\"top\" width=\"200\"><strong>Multiple<\/strong><\/td>\n<td align=\"center\" width=\"100\">15<\/td>\n<td align=\"center\" width=\"100\">15<\/td>\n<td align=\"center\" width=\"100\">15<\/td>\n<\/tr>\n<tr bgcolor=\"#F2F2F2\">\n<td valign=\"top\" width=\"200\"><strong>Apple Watch<br \/>\nShare Price<\/strong><\/td>\n<td align=\"center\" width=\"100\"><strong>$2.70<\/strong><\/td>\n<td align=\"center\" width=\"100\"><strong>$7.95<\/strong><\/td>\n<td align=\"center\" width=\"100\"><strong>$13.50<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>Smartwatches will be a nice addition to Apple\u2019s product line in that they will further institutionalize an already iconic brand. However, in looking at just the annual hardware sales, our projections suggest anywhere from a 3% to a 13% impact on share price. At the low end of the projections, the impact is anemic. At the high end, the impact is significant, but hardly seismic. There may be a host of reasons to buy Apple stock, but the Apple Watch by itself isn\u2019t one of them.<\/p>\n<p>The better investment option is to look at companies that supply Apple; this is one of the things we track at <em>BIG TECH<\/em>. One Apple chip supplier, Avago Technologies, yielded our subscribers over 100% return in just over 12 months, piggybacking on the rise of the iPhone.<\/p>\n<p><a href=\"http:\/\/www.caseyresearch.com\/go\/udp6u-2\/PIP\" target=\"_blank\">For access to our unparalleled investment advice, simply sign up for a 90-day risk-free trial of <em>BIG TECH<\/em>.<\/a> If you decide to keep your subscription, it will only cost $99 a year. If for any reason you\u2019re unsatisfied, simply cancel for a full refund. No questions asked.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<div id=\"xvMdV95u77zU\" style=\"clear: both;\">The article <a href=\"http:\/\/www.caseyresearch.com\/go\/udp9v-2\/PIP\" rel=\"permalink\">Is Apple Watch a Needle Mover?<\/a> was originally published at <a href=\"http:\/\/www.caseyresearch.com\/go\/udpuw-2\/PIP\">caseyresearch.com<\/a>.<\/div>\n<div style=\"clear: both;\"><\/div>\n<div style=\"clear: both;\"><\/div>\n<div style=\"clear: both;\"><\/div>\n<div style=\"clear: both;\"><\/div>\n","protected":false},"excerpt":{"rendered":"<p>By Adam J. Crawford, Analyst, caseyresearch.com The investment community has been up in arms over a lack of innovation from Apple. After all, the company hasn\u2019t launched a new product line in quite some time\u2026 that is, until now. Meet the company\u2019s brand-new smart device: Apple Watch. Investors hope the product will send Apple\u2019s stock [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-60927","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/60927","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=60927"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/60927\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=60927"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=60927"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=60927"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}