Apple Inc. is set to release its earnings numbers for the three months through June on July 21, but one thing is still not clear. The firm began selling the Apple Watch on pre-order on April 10, right after the third quarter began, but it’s not clear if CEO Tim Cook and CFO Luca Maestri are going to okay the release of the sales figures in the coming earnings report.
So far most estimates of Watch sales exist in a vacuum. Most of those looking at the device on Wall Street aren’t ready to call it a failure just yet, but there’s a large range of different forecasts for sales of the device. In a report released on Monday morning Societe Generale analyst Andy Perkins said he expects sales to come in at 5m for the three months.
Wall Street forecasts the Apple Watch
There’s no consensus on sales, however, and Apple , which normally releases guidance figures for the iPhone shortly after release, has kept quiet on the numbers. That has left Wall Street, and other research firms, to guess in a vacuum.
The 5m unit figure from Mr. Perkins at Societe Generale exists in direct contrast to the 3.9m that Sherri Scribner of Deutsche Bank thinks Apple managed to sell in the three months. A report from Slice Intelligence, which relied on US email receipts as a proxy for sales, showed that Apple sold 2.8m units in the US through mid June.
The Slice intelligence figure could match up with that from Perkins at Credit Suisse or Scribner from Deutsche Bank depending on how sales across the globe went. It’s not clear how many units of the device Apple allotted for sales in Europe or further afield.
Pacific Crest Securities analyst Brad Hargreaves reckons that Apple sold 5.5m units of the device in the three months, but lowered his forecast for the first six months of sales to 10.5m.
Because of the lack of guidance from Apple, many on Wall Street have shied away from forecasting figures for the third quarter, instead focusing on projections for the full calendar year. Some, like Trip Chowdhry of Global Equities Research, think that the last three months of the year will be key for sales of the device.
Katy Huberty of Morgan Stanley says that sales look very strong and the firm should sell 36m units through the end of December.
Mr. Chowdhry is still Wall Street’s biggest Apple Watch supporter. He sees sales for the full year coming in at 40m or more. Gene Munster, an Apple fan who covers the firm for Piper Jaffray, says that he thinks sales for the nine months through the end of December will amount to just 8m.
Between those extremes, there’s a plethora of voices calling for almost every number in between. Every single one of them is hoping for some news on sales next week so that they can realign their models, but it’s not clear if that’s going to come.
Will Tim Cook talk about the Apple Watch?
Tim Cook has had no problem talking about Apple watch sales in vague terms, but those with shares in his firm will be looking for more than that this time around.
Some following the firm on Wall Street expect iPhone sales to slow from here on out as the Chinese market stops growing and Western markets become completely saturated. Investors want to know if Apple’s big bet on wrist-borne hardware is working out.
On April 10, the first day of preorders for the Watch, Mr. Cook said “Customers have been giving us great feedback and orders have been great, as well.” He didn’t speak about full numbers, however, and after opening weekend finished Apple was silent on sales. The firm traditionally reveals sales of the new iPhone once orders from opening weekend are over.
Back in October of 2014 Apple said it wouldn’t reveal Watch sales numbers directly in its quarterly earnings report, but the firm reveals a lot of info outside of those reports. It was thought that Apple Watch numbers could be revealed to devs, and the general public, during WWDC 2015, but Tim Cook and the rest of the firm’s leaders kept their silence.
Is production to blame?
During the firm’s second quarter earnings call, Mr. Cook deflected questions about the sales of the Apple Watch in order to talk about another issue. “Right now demand is greater than supply. And so we are working hard to remedy that,” he said.
He added that the firm was “making adjustments to get in line with demand. But I’m really confident that this is something we really understand how to do and will do.”
There were problems getting the Watch up to levels that could get units into Apple Stores around the world. Those issues may have restricted sales so much during the weeks after launch that Apple felt it might hurt to release numbers that offered only part of the story.
The Apple Watch came to stores in the US and in other parts of the world at the start of June. It seems that the firm has gotten demand in line with supply, and might be able to give a better account of sales given the lack of those problems.
Production problems may have been at the heart of the initial secrecy about Watch numbers from Apple, but the firm will not be able to keep using that line forever. Right now Apple Watch numbers are outside of the firm’s earnings report, but investors may begin to ask serious questions if numbers aren’t at least alluded to in next week’s report.
The Apple Watch doesn’t matter, for now
At the end of earnings day, Apple stock is not going to move on reports of Watch sales. Right now it’s the iPhone that matters at the firm. The device captured 92 percent of all profit in the smart phone last year, and it is the single space in which Apple truly excels.
iPhone sales are going to capture the majority of the interest of those watching next week’s numbers, and with good reason. Though the Apple Watch might be an interesting growth area for Apple going ahead, after its first quarter on sale it’s a sideline.
Many bigger businesses at Apple, like the Mac segment which appears to have had another great quarter, are almost entirely ignored by investors when earnings numbers come around. iPhone sales will remain at the top for some years to come, even if growth slows down this year or the next.
We won’t know if Tim Cook intends on releasing Watch sales numbers until after the conference call is over, and the business is likely too small for any on Wall Street to draw meaningful conclusions about Sales from the “Other” category on the Apple report.
That’s the way Luca Maestri, and the rest of those in charge of figures at Apple, designed it. If there’s one thing that Apple knows, it’s design.