Piper Jaffray advises 'conservative expectations' for Apple Watch, predicts first-year sales of 10M

Posted:
in AAPL Investors edited October 2014
Investment firm Piper Jaffray thinks the potential market for the upcoming Apple Watch is "huge," but warned investors on Wednesday that it will take time for the wrist-worn smart device to grow into its full potential.

Apple Watch faces


Analyst Gene Munster currently forecasts sales of 10 million Apple Watches in calendar 2015 with an average selling price of $500. In his latest note to investors, a copy of which was provided to AppleInsider, he advised that market watchers share his "conservative expectations" for first-year sales.

"Overall, we believe that the Apple Watch is light years ahead of any other smartwatch on the market, but consumer application may be limited initially until developers begin to create useful applications for the watch," Munster wrote.

If Munster's predictions of 10 million units sold at an average price of $500 prove accurate, the analyst believes the fledgling product category would add about 3 percent to the company's calendar year 2015 revenue.

"We believe that to date, there have been less than 3 million smartwatches sold in total, thus the Apple Watch will represent a significant change in the smartwatch industry," he said.

Piper Jaffray surveyed 386 customers who were waiting in line to buy the iPhone 6 on launch day. They found that 34 percent of respondents said they did expect to buy the Apple Watch, while 66 percent were not planning to do so.

Apple Watch Sport


Munster noted that the global fashion watch market is a $62 billion industry with 1.2 billion units sold per year. Munster expects that Apple will have a significant presence in the market, especially among watches priced between $300 and $1,000.

Apple has announced that its Watch will have a starting price of $349 when it launches in early 2015. It's expected that other models could be priced considerably higher, particularly the Apple Watch Edition model, which features an 18-karat yellow gold case.

Piper Jaffray has maintained its "overweight" rating for AAPL stock with a price target of $120.
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Comments

  • Reply 1 of 75
    pmzpmz Posts: 3,433member
    The day it goes on sale, the number of potential qualified buyers (iPhone 5, 5c, 5s, 6, 6 Plus owners) will be somewhere in the neighborhood of 350,000,000 people.

    They'll sell 10 million the first weekend.
  • Reply 2 of 75

    Quick, sog35, make a bet with them!!

     

    Piper Jaffray must shut down for a month if they are wrong!!

  • Reply 3 of 75
    What a joke. How can they possibly predict any sales when we have no idea what the prices are for each model? Just stupid (but I think 10 M is very low; only if Apple can't produce more).
  • Reply 4 of 75
    macxpressmacxpress Posts: 4,861member
    Quote:
    Originally Posted by island hermit View Post

     

    Quick, sog35, make a bet with them!!

     

    Piper Jaffray must shut down for a month if they are wrong!!


     He might as well shut down now then. If available, I bet they sell 10M in the first weekend, if not the first week of sales. Again, if inventories are available. 

  • Reply 5 of 75

    You really have to laugh when these firms make these absurd predictions. Do you really think that Apple could possibly sell less than 10 Million in the first month ? What evidence do they have to predict only 10 Million in the first year ?

  • Reply 6 of 75
    [quote name="scottkatz" url="/t/182619/piper-jaffray-advises-conservative-expectations-for-apple-watch-predicts-first-year-sales-of-10m#post_2611042"]You really have to laugh when these firms make these absurd predictions. Do you really think that Apple could possibly sell less than 10 Million in the first month ? What evidence do they have to predict only 10 Million in the first year ?
    [/quote
    By aiming low, they're never wrong. It happens, even Apple sandbags fourth quarter guidance to not account for the launch of a new iPhone, just in case a delay prevented an on time launch.
  • Reply 7 of 75
    boeyc15boeyc15 Posts: 986member

    It is an interesting exercise, how in to predict the user base etc.

     

    Personally IM(negative Nelly)O - Im thinking a lot lower.  Perhaps a couple million in first year (mainly curiosity seekers) and then a drop off.

    My un-informed completely asshat guess (hey I can be an analyst too) is more along the lines of Apple TV sales. Its not a main stream thing. Not everyone needs a 'smart' watch, let alone a watch. Has to be recharged every night, obsolete in a couple of years. And this is not really a fashion accessory, even though Sir Jony designed it.

    Hope I'm wrong!

  • Reply 8 of 75
    I think the joker in the deck is what happens with the ApplePay roll out. If this is a hit, all of the owners of 5, 5c and 5s phones who are not upgrading will have an additional motive to buy the watch. Interesting that in the keynote, tha ApplePay capability of the watch was tossed out as almost an afterthought. I think that is one of its critical features.
  • Reply 9 of 75

    I think that everyone who popped for a new iPhone 6 or 6+ will buy one because they work together. Plus the Apple cool factor.

     

    Put that in your Piper Jaffray and smoke it.

  • Reply 10 of 75
    Quote:

    Originally Posted by pmz View Post



    The day it goes on sale, the number of potential qualified buyers (iPhone 5, 5c, 5s, 6, 6 Plus owners) will be somewhere in the neighborhood of 350,000,000 people.



    They'll sell 10 million the first weekend.



    hah.  irrational exuberance.

     

    10 Million seems like a legit number.  That's 5B in sales.

     

    note the numbers.  Fashion watch industry is a  62Billion dollar market with 1.2Billion Unit Sales.    Average selling price is $51.67.

     

    (in 2011, Rolex sold 750,000 'movements', and had 7Billion in revenues: Avg Selling price $9300: they had 11% of the revenues on .1% of the units)

     

    Apple is selling a watch that is 10X the average selling price, and requires people to commit to spending a minimum of $1000 a year on a phone plus a plan.   And at this point, we don't know how long the watch 'lasts'  (will become obsolete.   A Rolex is 'timeless'  A gadget, well, a good Apple device lasts about 10 years before it's physically obsolete, and in today's privacy world, I would argue that it's only 5 years before you need a SoC upgrade to support the minimum OS/firmware.).  Thus you 'really' need to feel confident this is the watch for you, for the next couple years, and/or have some idle trust fund dosh to toss at Apple for the 'bling' factor.

     

    Of those 350,000,000 million potential buyers, my guess is 300,000,000 consider an additional $400 purchase something serious to consider, it has to solve at least 3 jobs that their phone and their current watch is NOT doing (e.g. telling time isn't one of them, and looking good isn't one... the iPhones look great).  My guess is if you get 1 in 50 (6M) to buy... you'll be lucky [not a conservative number].

     

    and the other 50,000,000;  Same problem they need the watch to solve a job; AND they already have 1-5 $500+ watches in the collection that state they can afford a pricey watch.  If they get 1 in 5 to buy next year, that's a good year.  That's your 10M 'conservative' number, the 6 million is your wildly optimistic number.

     

    And that is back to the original iPhone goal, 1% of the total watch market.

     

    Now, Figure in Version 2, the price will drop (iPhone prices dropped significantly) and/or the functionality will increase (e.g. battery life).

    That's the watch 300,000,000 million people will consider, and if 1 in 5 of those buy, that's 60,000,000 in sales over 2 years.

    And Smart/cautious/prudent People will Osborne a little, (I do, Never buy V1.0 of a device).

     

    And by V2, the number of 'jobs' the watch will do, will grow (just like V2 of the iPhone (3G) and iOS (appStore)) to drive more global acceptance.

     

    This is the iPhone script, people... wait a year, then double down.

  • Reply 11 of 75
    Quote:
    Originally Posted by boeyc15 View Post

     

    It is an interesting exercise, how in to predict the user base etc.

     

    Personally IM(negative Nelly)O - Im thinking a lot lower.  Perhaps a couple million in first year (mainly curiosity seekers) and then a drop off.

    My un-informed completely asshat guess (hey I can be an analyst too) is more along the lines of Apple TV sales. Its not a main stream thing. Not everyone needs a 'smart' watch, let alone a watch. Has to be recharged every night, obsolete in a couple of years. And this is not really a fashion accessory, even though Sir Jony designed it.

    Hope I'm wrong!




    As stated above, the portability of the watch and it being a 'bling' on your arm accessory, will drive the vanity factor much higher than the AppleTV

    AppleTV is a utility device.  Connect your TV to your Internet and your Apple Stuff.

     

    Apple Watch is a 'extender' device.  I argue it is a fashion device (much like 'techno' is a fashion), and one that does a few yet to be determined functions that will make life easier.

     

    the intersection of  [number of people in households making more that $250,000US a year][own an iPhone][strive to be 'online' all the time][Are Athletic/health obsessed] is the target market.

     

    That' the top 5% of the wage earners in the US, 75% of them own one 1 iPhone, 50% are likely online and health aware. That's 2.5% of the US population, and extrapolating, 1% of the world.

     

    if the world buys 1.2 Billion phones a year, 1% of that would be 12Million.

     

    Again, the same penetration Apple sought for the iPhone at the end of year 1.

  • Reply 12 of 75

    I think Apple would consider 10 million in the first year a failure. I would, too. 

     

    I think they would be aiming for at least 15 million, if not 20 million. The iPad sold over 15 million in its first year.

  • Reply 13 of 75
    pazuzupazuzu Posts: 1,728member
    I think Apple would consider 10 million in the first year a failure. I would, too. 

    I think they would be aiming for at least 15 million, if not 20 million. The iPad sold over 15 million in its first year.

    I know a lot of Apple product owners who think it a very niche product with absolutely no interest in it.
    In addition my 6th gen iPod Nano with a wrist band looks about the same as this - and that's over 3 years old.
  • Reply 14 of 75
    aaarrrggghaaarrrgggh Posts: 1,578member
    boeyc15 wrote: »
    It is an interesting exercise, how in to predict the user base etc.

    Personally IM(negative Nelly)O - Im thinking a lot lower.  Perhaps a couple million in first year (mainly curiosity seekers) and then a drop off.
    My un-informed completely asshat guess (hey I can be an analyst too) is more along the lines of Apple TV sales. Its not a main stream thing. Not everyone needs a 'smart' watch, let alone a watch. Has to be recharged every night, obsolete in a couple of years. And this is not really a fashion accessory, even though Sir Jony designed it.
    Hope I'm wrong!

    One simple market demographic: Fitness. How many people wear a heart rate monitor when they exercise? What percentage don't? Why? For most I know, it is because the chest strap is a pain. A good heart rate monitor is $200, so the addressable market of a $400 ?Watch is likely the top 10% of the heart rate monitor market. Guessing, but that should be a good 100MM there, so you would need about 10% for 10MM units from this demographic.

    A lot of other potential demographics are not yet clear if they are viable-- watersports? Is it submersible?

    There is a huge market for the watch, but it is going to evolve over time. It won't really move the needle for Apple that much, but it is a growth engine.
    pazuzu wrote: »
    I know a lot of Apple product owners who think it a very niche product with absolutely no interest in it.
    In addition my 6th gen iPod Nano with a wrist band looks about the same as this - and that's over 3 years old.

    People don't have any interest in it until they can imagine how they would use it. That requires actually having seen the keynote.

    It might not look much different than the nano-on-a-band, but functionally it is a whole new ballgame.
  • Reply 15 of 75
    mr omr o Posts: 1,046member

    PJ is going to look ridiculous if Apple manages to turn the ? watch into a Life saving device.

     

    The craftsmanship is there already. It is up to the developers now.

  • Reply 16 of 75
    solipsismxsolipsismx Posts: 19,566member
    pmz wrote: »
    The day it goes on sale, the number of potential qualified buyers (iPhone 5, 5c, 5s, 6, 6 Plus owners) will be somewhere in the neighborhood of 350,000,000 people.

    They'll sell 10 million the first weekend.

    That's like putting then iPod numbers against the 2007 iPhone. Jobs stated he wanted 1% (10MM) in the first year which I believe they did but not by a wide margin. I think it's best to look at this from the standpoint of the watch market, not a handset.
  • Reply 17 of 75
    brucemcbrucemc Posts: 1,527member

    Really hard to predict, although as others have said, all new products from Apple have followed a similar adoption curve (though iPad was fastest).  My guess is that 10M is the rough minimum that would be sold in the CY 2015, but clearly there are catalysts for higher adoption (with my very high end guess being 20M).  

     

    The starting price at $350 USD is quite below the original iPad, and well within the "gift range" for a sizeable portion of the iPhone population, or a "spoil myself" gift for some - certainly more so than the iPad was.  And compared with original iPhone, countries and distribution outlets should be significantly more.  The "upper class" in emerging markets continues to grow, providing a larger base than 4 years ago as well.  If ?Pay takes off as noted, this would (I think) bring it to the iPhone5x owners as well, perhaps being as mentioned above, a key use case.

     

    It will be persons trying it out for reasons such as novelty/curiosity mostly, but from there will come the apps & usecases where it drives higher due to many more uses (some of which we aren't even envisioning yet).  As I heard mention the other day, never underestimate the human drive for greater convenience, even if it seems trivial.  Almost all new cars today have keyless entry, and whenever you use a car that doesn't I bet you think "how old school", and miss it.  We enjoy that small convenience of pushing a button vs. using a key, but it certainly wasn't necessary.  We keep hearing similar on these threads along the likes of "why would I buy an ?Watch just to look at the time/some info, when I can easily take my phone out of my pocket".

  • Reply 18 of 75
    solipsismxsolipsismx Posts: 19,566member
    The iPad sold over 15 million in its first year.

    You say that as if the iPad was a laggard. The iPad is Apple's most successful HW product in terms of unit sales growth for a given time frame.
  • Reply 19 of 75
    Quote:

    Originally Posted by boeyc15 View Post

     

    It is an interesting exercise, how in to predict the user base etc.

     

    Personally IM(negative Nelly)O - Im thinking a lot lower.  Perhaps a couple million in first year (mainly curiosity seekers) and then a drop off.

    My un-informed completely asshat guess (hey I can be an analyst too) is more along the lines of Apple TV sales. Its not a main stream thing. Not everyone needs a 'smart' watch, let alone a watch. Has to be recharged every night, obsolete in a couple of years. And this is not really a fashion accessory, even though Sir Jony designed it.

    Hope I'm wrong!




    The same can be said for any technology product. Do you really need a high-end smartphone or can you buy a 3 year old Android or iPhone? 

  • Reply 20 of 75
    mj webmj web Posts: 918member
    I have a hunch a large percentage of iPhone Plus users will tire of its unwieldy form factor and welcome the Watch as an interface which reduces the need to access the phone. I believe this was Apple's primary rationale to create a Watch.
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