Apple (AAPL) stock fumbled a bit in the last few months, and ramblings of tepid Watch sales hasn’t done Apple stock price any favors, either. Oh well, you live and you learn. And, Apple’s learned it can sell more iPhones year over year, as long as the Apple brand remains strong.
In 2015, Apple’s magic number is 85 to 90 million; that’s how many iPhones Apple’s asking suppliers to manufacture of its latest models.
Let’s be clear here, the iPhone is the only thing that matters, and that’s totally fine.
Remember, AAPL shares jumped after last holiday’s staggering 46% growth in iPhone sales totaling 74.5 million units. Apple stock climbed to its high of $134 in the month after, and even the (supposed) disappointing sales of Watch haven’t put much of a hurting on AAPL.
The iPhone is One Infinite Loop
The iPhone trucks in just over $40 billion in revenue (roughly 70% of Apple’s sales), and it’s not going anywhere. T. Michael Walkley, an analyst with Canaccord Genuity, noted the current iteration of iPhone surged in demand, despite competition from Google (GOOG), Samsung (SSNLF), LG (LPL) and HTC devices, and expects Apple to deliver 235.2 million units in fiscal 2015.
Look at what our own Jeff Reeves wrote back in April:
“Just do the math: The iPhone business in a vacuum ranks as one of the top 10 companies in U.S. by revenue — and one of the top 30 in the world. The iPhone alone does more sales than telecom giant AT&T (T), more than General Motors (GM) and more than state-owned energy giants including Russia’s Gazprom, the Kuwait Petroleum Corp. or Venezuela’s PDVSA. The iPhone is a killer, no doubt. But you think Apple has another one of those things up its sleeve?”
Apple thinks so, which is why the company is ramping up production. As Jeff says in that same article, “it’s dangerous to count out a company like Apple.”
No matter what happens with Apple stock, it all keeps coming back to the iPhone.
The Watch Doesn’t Have to Be Another iPhone
Watching the rampant bearish speculation on the fate of Apple’s Watch is like speculating on the fate of Detective Ray Velcoro in True Detective — and just like Velcoro, the Watch is very much alive, but it wouldn’t matter too much if it flatlined, either.
Slice Intelligence estimates Watch sales peaked in the first week at 1.4 million (200,000 per day) and declined to roughly 20,000 a day. It’s important to remember, though, that these are U.S. guesstimates. Now, think back to the first iPhone — that one sold 1.4 million units globally, and not in a week, either, but from launch to the end of the fourth quarter.
Then, there’s Apple’s iPad, which sold 3.3 million in the quarter it released. Sales for Apple products have increased exponentially, of course, and expectations have as well. The Watch, however, isn’t a continuation of any product launched before, and it’s also not a standalone device (being dependent on the iPhone), so those numbers tell us more about how enthusiastic and faithful Apple’s early adopters are, than how brutal the market is for Apple wearables.
The data from Slice puts the total sales figures for Watch around 2.8 million. That’s not bad for a new, iPhone-reliant product that doesn’t take into account sales from China, Japan or the U.K.
Investors figured AAPL for a correction, but the stock turned around on Friday, illustrating the decline of Apple stock wasn’t related to Watch sales, but is the downside of being a “megastock” that reflects broader market sentiment. In the last three months, for instance, both AAPL and the S&P are in the red.
If it somehow wasn’t clear before, the iPhone is what drives Apple stock. Apple may be the biggest company in the States, but by raising the stakes with daunting iPhone production expectations, Apple has added fuel to the growth story that never ends.
As of this writing, John Kilhefner held no positions in any of the aforementioned securities.
