Will the Apple Watch wow Wall Street? Analysts are not in agreement, with some expecting the watch to give the stock an iPhone-like boost and others worrying that investors will dump the stock if big watch sales don’t materialize in a timely manner.
William Power of Baird Equity thinks it is very possible that Apple booked a million orders during the first weekend of watch sales. The watch sold out for April delivery during the early hours of Friday morning. Power is projecting about 4 million watch sales for the current quarter, and about 20 million for the calendar year. But he thinks watch sales will account for less than 3% of Apple’s revenue this year.
The analysts at Cowen and Company also estimate that Apple sold about a million watches over the weekend, but are not sure Apple can keep up with that level of demand.
“Our latest field work in Asia still suggests yield and supply issues persist and we still view Apple Watch v1.0 as a category creator that won’t ultimately wow consumers until v2.0 version later this year,” the Cowen analysts wrote in a research note. The analysts also visited Apple retail stores over the weekend, and found that 85-90% of the customers who made appointments to see the watch ended up ordering one.
Before the Apple Watch’s opening weekend, Travis McCourt of Raymond James Equity Research downgraded Apple to “market perform” from “market outperform,” saying that less-than-stellar reviews of the watch could cause investors to decide that the company lacks the ability to compete in new product categories.
Baird Equity’s Power agrees that successfully entering new product categories is important for Apple, but he is not putting all his hopes on the watch. He sees TV/video as a bigger and ultimately more promising new area for Apple.
For now, Apple seems quite capable of wowing Wall Street by creating products in its existing categories. After booking $38 billion in net income on $182 billion in sales during the fiscal year ended last fall, Apple went on to report record sales of its newest iPhones.
Apple stock is up 16% year-to-date and up 70% vs. this time last year. After leaving the tech-heavy NASDAQ behind to become part of the Dow Jones Industrial Average, the stock (AAPL) has traded in a fairly narrow range, slightly below its high of $133 set Feb. 23.
