Consumer Electronics

Can Apple Watch Sales Reach 40 Million?

For the most part, sales expectations for Apple Inc. (NASDAQ: AAPL) have been muted so far. Analysts continue to focus on iPhone sales, which are by far the largest contributor to Apple’s revenue. But as time passes since the launch of the smartwatch, Wall Street will keep a more careful eye on it, because something has to shoulder the stagnation, or drop, of iPad and Mac sales.

According to Barron’s, Katy Hubert who is an analyst at Morgan Stanley, believes Apple Watch sales will reach 36 million in the year immediately after its launch. Because Apple does not release figures on its smartwatch, forecasts are nothing more than a guess, driven by small pieces of research that cannot be definitive. However, should Apple Watch sales reach 40 million in the next year, it would be difficult to claim it is anything short of a major success.

In its most recently reported quarter, Apple management disclosed that iPad sales had fallen 23% to 12.6 million in the same period the year prior. Measured sequentially, quarter over previous quarter, unit sales fell 40%. While the iPad has become a second-tier product for Apple, its sales, at $5.4 billion last quarter, were 8% of Apple’s revenue. As the number continues to slip, it has to be replaced by iPhone sales or sales of the Apple Watch. Revenue from Mac sales barely rose from a year ago, and it dropped by 19% sequentially to $5.6 billion. Between them, the iPad and Mac are nearly a fifth of Apple’s revenue.

On the back of an envelope, for Apple Watch to be a success financially and contribute to Apple’s momentum, its revenue contribution needs to be close to $5 billion. With an average price point of just above $500, that will be difficult.

Expectations for Apple Watch sales are not very high, compared to iPhone sales. However, as Apple needs to fill in the holes made by Mac and the iPad, Apple Watch numbers are more and more important.

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