To understate things, the soon-to-be-launched Apple Watch has a few critics.
Even some long-standing fans and followers of Apple Inc. (NASDAQ:AAPL) have questioned the mass marketability of such a device, while some people who don’t put AAPL on a pedestal have called the Apple Watch nothing less than “a very stupid idea.”
Ouch.
Before current or prospective owners of Apple stock become too worried that a tepid market response to the Apple watch could upend the value of AAPL though, it may be worth taking a step back and looking at the bigger picture.
The reality is — and this is coming from a guy who absolutely hates the fact that Apple’s biggest and most vocal fans tend to act like lemmings — the Apple Watch is apt to be a bigger success than many are anticipating.
Perhaps even more importantly (though rarely stated), Apple won’t have to sell hundreds of millions of its timepiece for the device to be considered a success. Here are four reasons current AAPL investors should be optimistic.
Apple Watch Pre-Orders Were Very Strong
The tally is completely unofficial, but likely close to being on target. All told, Slice Intelligence estimates that nearly 1 million Apple watches were pre-ordered on Friday … the first day the device could be reserved online.
It’s a number that obliterates an early prediction made by Paper Jaffray analyst Gene Munster, who only called for 300,000 Apple Watch pre-orders in his forecast offered a couple of weeks ago. This exceedingly strong “beat” may well point to greater demand for the device than had been initially anticipated.
The Apple Watch Could be Huge in China
While the public superficially seems split on whether the Apple Watch is an elegant tool or a clunky waste of time and money, the framing of the argument may well be a problem in itself — it’s a North American-driven debate. In China, even though the majority of that population may not buy the Apple Watch, enough of the country’s 1.35 billion people already love the Apple Watch enough to support an entire counterfeit market for the device.
See, though Apple is a brand name that carries clout in the United States, Chinese consumers go outright berserk for anything with an Apple logo on it.
The Apple Watch Doesn’t Cannibalize Anything
One of the chief problems the iPad had (and still has) is that the iPhone can do almost everything the iPad can do (albeit it on a smaller screen). For many consumers, it was an either/or choice between the two. In the same vein, the iPad could accomplish all the computing needs most consumers would need a Mac for, thus negating the need for a higher-end computer purchase.
The Apple Watch doesn’t step on any other product’s toes; any revenue the watch creates will be wholly, incrementally added to the top line Apple is already producing. Since the technology and manufacturing capabilities are already in place, why not tap into them? In fact…
The Apple Watch Enhances the Stickiness of AAPL Products
While sales forecasts for the Apple Watch may not be anywhere near on par with the sales numbers the iPhone is capable of putting up, for the few million who do decide to take the plunge and make the purchase, the usability of their iPhones was just taken up a notch. Maybe two notches.
The Apple Watch is going to make it much easier to prod an upgrade purchase once the iPhone 7 is released.
Granted, it’s still only a small sliver of the total iPhone-owning crowd, but nickels and dimes add up, and Apple is always looking for new ways to keep their products in consumers’ hands (like controlling the Apple TV device with your iPhone).
Bottom Line for AAPL
Calling a spade a spade, yes, the Apple Watch is still silly at best, and pointless for most consumers.
It doesn’t matter though. Consumers often love silly and pointless. Examples include Beanie Babies, an iPhone app that simply recreates the sound of a stapler, Snuggies, most things found in a Sky Mall catalog and pet rocks, just to name a few.
Consumers are into silly and pointless, especially when it may just end up being useful in ways we’ve yet to realize.
And that may be the biggest reason of all to get excited about the Apple Watch — the chance that it could just become the new norm. It costs Apple practically nothing to take that shot, so why not take it? As I said at the beginning of April, it’s a low-risk, decent-reward prospect.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
