Apple Inc. (NASDAQ:AAPL) has created its single most profitable device of all time with the Watch according to a new report on the prospects of the company’s wearable computer. Big Think Analytics analyst Carl Howe reckons that Apple sold 3 million units of the device in 3 weeks and took in gross margins in excess of 60% as a result.
That means that Apple has done what seemed impossible: it’s created something that can actually increase its gross margins. Mr. Howe says that the first two weeks of sales have already resulted in $2 billion in revenue that Cupertino.
Apple Watch sales breakdown
Howe’s very positive gross margins result from his estimates that Apple managed to sell a high proportion of standard Apple Watch models. According to that analysts’ breakdown, the company sold 1.8 million units of the Apple Watch Sport, 1.2 million of the Apple Watch and 40,000 of the Apple Watch Edition.
Other analysts have been less optimistic about the product mix of the Apple Watch. KGI securities analyst Ming Chi Kuo reckons that 85% of the units of the Watch sold on opening weekend were of the Sport variety.
Interestingly if Howe’s numbers are right the Watch Edition will make up about 20% of the total revenue of the Apple Watch despite making just over 1% of the total sales of the device with $400 million of revenue in just two weeks on the market.
Analysts worry about Apple margins
Apple’s margins have always been a worry for analysts covering the Cupertino company. To put it lightly, the firm’s margins are unprecedented, and their longevity is impossible to maintain, or so it seemed previously. With Tim Cook’s supply chain acumen the firm’s incredible branding power, Apple has keeps its gross margins creeping toward 40%.
If Howe is right the company may blast past that figure when the Watch takes off and becomes a significant part of revenue. He doesn’t think the high margins for the Watch are temporary either. In fact it seems he’s looking for them to grow. “Unlike in the consumer electronics business, I see no pressure for prices to fall and if anything manufacturing costs will, resulting in a very profitable business.”
Apple Watch delay continues
Howe might be optimistic about the financial implications of the Apple Watch at Cupertino, but he’s not as confident in the firm’s ability to ramp up production of the device. According to his report Apple will quickly bring unit production to 2 million per month, but won’t be able to keep up with demand. That will result in a backlog through most of the Summer and possibly beyond.
Update 11:38 EST: As Apple isn’t going to actually report specific Watch numbers in its earnings report, the actual gross margin of the Apple Watch may not be known. In a recent report FBR analyst Dan Ives said that Apple software and services are going to drive revenue in the first quarter of the year and through 2015. That’s going to have a dramatic effect on Apple gross margin.
The Apple Watch will appear in the company’s “other” section on the earnings report and the company isn’t going to show specific numbers for it. That means the world may not even get a glimpse at the raw numbers of the Apple Watch sold, never mind the cost and revenue breakdowns that would be necessary to calculate gross margins.
Going forward, that means that the 60% margins is as good as any other for the time being. The Big Think Analytics gross margin estimate is based on several other estimates, including product mix and raw material cost. When estimates for those numbers get better, as they will with market research and greater volume sales of the Apple Watch, the gross margin numbers are likely to go up.
Whether it comes from the Apple Watch, or software and services, however, there’s plenty of reason to think that Apple’s margin is going to climb in the coming years.
Trusted & Regulated Stock & CFD Brokers
What we like
- 0% Fees on Stocks
- 5000+ Stocks, ETFs and other Markets
- Accepts Paypal Deposits
Min Deposit
$200
Charge per Trade
Zero Commission on real stocks
64 traders signed up today
Visit Now67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Available Assets
- Total Number of Stocks & Shares5000+
- US Stocks
- German Stocks
- UK Stocks
- European
- ETF Stocks
- IPO
- Funds
- Bonds
- Options
- Futures
- CFDs
- Crypto
Charge per Trade
- FTSE 100 Zero Commission
- NASDAQ Zero Commission
- DAX Zero Commission
- Facebook Zero Commission
- Alphabet Zero Commission
- Tesla Zero Commission
- Apple Zero Commission
- Microsoft Zero Commission
Deposit Method
- Wire Transfer
- Credit Cards
- Bank Account
- Paypall
- Skrill
- Neteller
What we like
- Sign up today and get $5 free
- Fractals Available
- Paypal Available
Min Deposit
$0
Charge per Trade
$1 to $9 PCM
Visit Now
Investing in financial markets carries risk, you have the potential to lose your total investment.
Available Assets
- Total Number of Shares999
- US Stocks
- German Stocks
- UK Stocks
- European Stocks
- EFTs
- IPOs
- Funds
- Bonds
- Options
- Futures
- CFDs
- Crypto
Charge per Trade
- FTSE 100 $1 - $9 per month
- NASDAQ $1 - $9 per month
- DAX $1 - $9 per month
- Facebook $1 - $9 per month
- Alphabet $1 - $9 per month
- Telsa $1 - $9 per month
- Apple $1 - $9 per month
- Microsoft $1 - $9 per month
Deposit Method
- Wire Transfer
- Credit Cards
- Bank Account
Share
