There’s only one event this weekend if you’re a tech industry analyst: Apple Inc. (NASDAQ:AAPL) begins accepting pre-orders for the Apple Watch.
The problem for Apple is that early signs show consumers — even die-hard Apple fans — aren’t showing up in numbers that would indicate Apple’s long-awaited foray into the smartwatch market is going to be a hit.
In fact, the level of disinterest may be a sign the official Apple Watch launch later this month will be a fizzle instead of the next big thing.
Indeed, investors already had cause to be nervous.
Apple Watch reviews have been rolling in and they’re a mixed bag. The size of the overall smartwatch industry is small, and Google (NASDAQ:GOOG, NASDAQ:GOOGL) is pushing into wearables in a big way with its Android Wear operating system. In fact, Android Wear is reportedly close to supporting Apple’s iPhone.
Not to mention that fitness trackers have also been gaining smartwatch functions, and wearable competitors have been building a lead for several years now.
To make the whole Apple Watch scenario even more iffy, the cheapest model available at the Apple Watch release is priced significantly higher than just about any comparable device.
Apple Watch Has a Lot Working Against It
For the $549 entry sticker price of the mid-range Apple Watch, you could buy two new Pebble Time Steel smartwatches (with 50 bucks left over) from Pebble — the only company that’s had a certified hit with a smartwatch. And that Pebble Time gets you 6 more days of battery life and works with Android smartphones, too.
Putting the smartwatch market in perspective, the company with the most success in selling smartwatches in 2014 was Samsung (OTCMKTS:SSNLF). With a handful of very different models — some running Android Wear, some running its own Tizen OS, one with a curved display and its own 3G cellular radio (in other words, covering every possible spectrum of demand) — Samsung sold just 1.2 million in all of 2014.
The most expensive of those devices was the curved glass Gear S that acts as its own smartphone and even that was priced $20 less than the cheapest Apple Watch.
News began trickling in this morning about underwhelming crowds at the Apple Watch pre-order events at Apple Stores worldwide, adding to investor anxiety.
According to CNN Money, the wait to try out the new Apple Watch at Apple’s London Store was only five minutes, and customers in the store were outnumbered by staff. In comparison, over 1,000 people lined up there last year for the iPhone 6.
The Sydney Australia Apple Store had two dozen people waiting in line for the Apple Watch, while Tokyo had 40 customers at the doors at 9 a.m. China has become Apple’s biggest market for iPhones, but at the Beijing Apple Store, only 14 people were lined up for the store opening.
Apple Watch Numbers May Hurt AAPL Stock
The big caveat here is that Apple has muddied the waters (perhaps intentionally), making it difficult to compare Apple Watch demand to that for a new iPhone.
During the Apple Watch pre-order phase, it’s taking orders online only. Those lining up at stores are trying on the Apple Watch, but they still have to pre-order the device through Apple’s website or Apple Store app. Because there’s no real advantage to showing up in stores, other than to physically try on the device and play with it for a few minutes, many customers may have simply stayed home and pre-ordered an Apple Watch without bothering to line up.
So trying to gauge overall Apple Watch release demand by in-store activity this weekend is tough.
Further complicating things, Apple reported supply constraints and some Apple Watch models were backordered for 4-6 weeks at the moment they went on pre-order. Depending on how things play out, this situation offers Apple the opportunity to spin even a disappointing weekend by saying Apple Watch pre-orders sold out — regardless of how many units it actually sold.
With the risk of a flop being so high, some analysts are downgrading AAPL. The latest came this morning when Raymond James downgraded the stock amid concerns that Apple Watch launch sales would fail to meet expectations.
Until Apple releases official Apple Watch pre-order sales numbers, we won’t have any real idea of how this is playing out. The ultimate test will be the April 24 Apple Watch launch, when lining up outside an Apple Store could actually result in leaving with an Apple Watch in hand.
In the meantime, AAPL investors are probably in for a bumpy ride.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
