If you’re an Apple Inc. (AAPL) stock owner, you really should not be reading about the Apple Watch … or rumored future versions of the Apple Watch. In fact, here’s a pro tip: Save yourself some time and ignore the Apple Watch forever. There, I just saved you some valuable time and energy. Life hack!
Of course I’m being a little facetious here. Good investors keep an open mind, and they pay attention to numbers. If two years from now Apple Watch sells 100 million units, yeah, maybe as an AAPL stock owner you might want to start paying it some mind. (Side note: That will never happen).
But today, the Apple Watch is a joke. There’s some talk today in the investosphere about the Apple Watch, and how some analyst thinks the Apple Watch 2 will drop this summer. Yet another analyst sees the Apple Watch 2 coming this fall, although she also sees Apple Watch shipments falling 25% this year.
I’m here to tell you that, as far as AAPL stock is concerned, it literally doesn’t matter who is right. Ignore them both; they’re not worth the online real estate you read them on, they’re not worth your time, and they’re certainly not worth any stress they might be causing you as an investor.
Why AAPL’s Watch Is a Sideshow
Unfortunately, I can’t explain how irrelevant the Apple Watch is without talking about it. So I’m going to focus one last article on it before ignoring it until it someday merits attention forever.
Okay, so analyst Ming-Chi Kuo of KGI Securities, who has an impeccable track record when it comes to predicting upcoming AAPL product features, estimates that Apple Watch shipped roughly 10.6 million units during calendar 2015.
How much revenue does that generate? Well, given its irrelevance, AAPL hasn’t deemed the Watch important enough to break off into its own reporting category, so we can’t tell from Apple earnings releases. But estimates for the average selling price range anywhere from lows of $400
to highs of $550. Let’s be liberal and take one of the more generous estimates: $529.
If AAPL sold 10.6 million Apple Watch units at $529 last year, that accounts for revenue of $5.6 billion. Apple’s revenue in fiscal 2015 was $231.3 billion. While Apple’s fiscal year starts in October and doesn’t exactly overlap the calendar year, you get the picture: This product is little more than a rounding error.
Then, if we assume that Apple Watch sales are falling to 7.5 million units in 2016 as Kuo expects, revenue falls to less than $4 billion. AAPL stock owners should see where I’m getting with this. The Cupertino giant is expected to post revenue of $227 billion in fiscal 2016. If we’re really, really generous, Apple Watch will account for 2% of sales this year.
Moral: Don’t ever read a story about Fitbit Inc (FIT) threatening Apple again. The opposite could be true, since Fitbit’s only thing is fitness trackers, but Fitbit will never threaten Apple’s business in any meaningful way.
Don’t get elitist though, Apple shareholders. As you are probably aware, AAPL is basically a one-product company itself. The iPhone accounted for 68% of revenue last quarter. The iPad and Mac product lines are both still relevant, but becoming less so with every quarter sales fall.
Don’t ever read a story about the Apple Watch again — it’s iPhone, iPhone, iPhone. Everything else is noise.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
