Apple Watch, AirPods & HomePod, Apple's 'other products,' predicted to rake in $22B in rev...

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in AAPL Investors
Fueled by a trio of new product categories, Apple's all-encompassing "other products" are poised to become the company's fastest growing segment, further fueled by the recent launch of HomePod.




Apple lumps products for which it does not offer sales data into the "other products" category on its earnings reports. Beyond HomePod, it also includes AirPods and the Apple Watch.

As of calendar year 2016, Apple's "other products" brought in $11 billion in revenue. But analyst Robert Cihra of Guggenheim said in a note to investors this week, a copy of which was provided to AppleInsider, that he sees the number doubling by calendar year 2019 to $22 billion.




This year alone, Cihra believes the Apple Watch, AirPods and HomePod will push the category to $19 billion, or 7 percent of Apple's total revenue. In addition, he sees it being Apple's fastest growing segment, posting 34 percent year over year improvement.

To put the 7 percent share for "other products" in perspective, Apple's iPhone accounts for 63 percent of revenue, while the company's services business represents 13 percent, and the Mac brings in 9 percent. Cihra believes that "other products" will surpass the revenue share of the iPad this year -- Apple's touchscreen tablet is projected to account for less than 7 percent of total revenue.




While Apple doesn't break down products in the category, Cihra believes the big winner is the Apple Watch, which is forecast to account for 50 percent of "other products" revenue in calendar year 2018. He sees the company shipping 22 million watches this year, representing 26 percent year-over-year growth and earning $9.5 billion, or 3.6 percent of the company's total revenue.

As for AirPods, if Apple can sell to 3 percent of its 750 million iPhone installed base, that would amount to 23 million sales this year, or revenue of more than $3 billion. Those numbers would allow AirPods to surpass Apple's Beats division and account for 16 percent of "other products" revenue, or more than 1 percent of total revenue.

Finally, with HomePod, Cihra estimates a 10 percent attach rate to Apple Music subscribers, resulting in sales greater than 3 million and revenue of nearly $1 billion. He believes Apple could further drive sales with a so-called "HomePod mini" at some point in the future.

Guggenheim has maintained a "buy" rating for AAPL stock with a 12-month price target of $215.

Comments

  • Reply 1 of 11
    That's some really sketchy math using total installed base as the foundation rather than expected yearly sales of each product and then expecting the initial adoption rate of a new product to continue indefinitely.  You are using a number that is three times as high as total annual sales and still forecasting revenue growth at the same rate.  If you look at the chart he is forecasting AirPod sales to be almost $6B in 2020 which would amount to 46 million AirPods.  Most customers are going to buy a set of AirPods at the same time they purchase a new phone.  That implies an adoption rate of almost 20% of all new iPhone purchases.

    Same thing by tying HomePod sales to total Apple Music subscribers.  You may get 10% of everybody in the first year, but after that you are looking at 10% of new subscribers plus any people replacing their HomePod.  Unless this guy expects everyone to replace their HomePod yearly his growth rate assumption is highly skewed.

    I don't know about the Apple Watch, but I suspect the HomePod and AirPod sales will stabilize fairly quickly and the revenue growth rates will flatten out just like the Beats revenue looks in the chart.
    albegarc
  • Reply 2 of 11
    Saw in Twitter that Apple Watch shipment has surpassed Fitbit now. I know it’s an estimated number but still quite surprised. 
    watto_cobralolliver
  • Reply 3 of 11
    78Bandit said:
    That's some really sketchy math using total installed base as the foundation rather than expected yearly sales of each product and then expecting the initial adoption rate of a new product to continue indefinitely.  You are using a number that is three times as high as total annual sales and still forecasting revenue growth at the same rate.  If you look at the chart he is forecasting AirPod sales to be almost $6B in 2020 which would amount to 46 million AirPods.  Most customers are going to buy a set of AirPods at the same time they purchase a new phone.  That implies an adoption rate of almost 20% of all new iPhone purchases.

    Same thing by tying HomePod sales to total Apple Music subscribers.  You may get 10% of everybody in the first year, but after that you are looking at 10% of new subscribers plus any people replacing their HomePod.  Unless this guy expects everyone to replace their HomePod yearly his growth rate assumption is highly skewed.

    I don't know about the Apple Watch, but I suspect the HomePod and AirPod sales will stabilize fairly quickly and the revenue growth rates will flatten out just like the Beats revenue looks in the chart.
    Agree the math is sketchy. But, as an offset: 1) I think we'll see higher than expected AirPods because they will need replacing with some frequency. Their use case (portable/outdoors) means they are more likely to get lost or broken; 2) HomePod may see some upswing if people really find superior sound and so trade up to multiple rooms and/or "full room"; and 3) The set of "other products" seems likely to increase over time and isn't reflected here.
  • Reply 4 of 11
    eightzeroeightzero Posts: 2,013member
    HomePod Mini: nope. That ain't happening.

    Are "other products" hardware or software/service? If the former, I wonder what that could be?

  • Reply 5 of 11
    fallenjtfallenjt Posts: 3,837member
    eightzero said:
    HomePod Mini: nope. That ain't happening.

    Are "other products" hardware or software/service? If the former, I wonder what that could be?

    I agree. I don't recall Apple ever creating a cheap/low specs version of its flagship product. They may eventually reduce the price of the HomePod to $299 or so, but ain't no cheap version.
    edited February 15 watto_cobra
  • Reply 6 of 11
    eightzero said:
    HomePod Mini: nope. That ain't happening.

    Are "other products" hardware or software/service? If the former, I wonder what that could be?

    Other products are separate from the services business. Other products are hardware, services are things like Apple Music and iCloud subscriptions.
    watto_cobralolliver
  • Reply 7 of 11
    eightzero said:
    HomePod Mini: nope. That ain't happening.

    Are "other products" hardware or software/service? If the former, I wonder what that could be?

    I don't see them doing it either, which is too bad. I'd love a high quality, but smaller, HomePod for my bathroom to go with the one in our kitchen/family room. The current HomePod is overkill for that small of a space, but a $199 smaller version would be perfect (for me).
    watto_cobra
  • Reply 8 of 11
    FolioFolio Posts: 285member

    Of course it’s kinda hard to find numbers in “Others” category for things like yet unveiled AR glasses. And somehow analyst divines flat ATV hardware growth.

    More interesting to me is how philosophy of “Others” category evolves. Will it be exclusively to deepen the moat of the iPhone ecosystem? Or, as some items mature, will it allow new pathways into the Apple community?

    Right now three gates into Apple: phone, tablet, or computer. Pretty much everything else (Services, Others)  is designed to embellish the ecosystem experience. My hunch is that as “Others” category grows, in five years you might see an Apple watch version compatible with Android phones, untethered with 5G speed and a supercharged Siri this would become the cheapest gate into Apple garden and expand services, etc. If Apple really wishes world domination, that might be best way to gain it. 


    BTW I’m blown away by my Series 3 cellular watch, even more so than my iPhone X (which I still love but has been nagged by some iOS 11 glitches). Just four weeks in and Watch has really spurred my fitness and energy—mostly from running, walking, biking apps. Surprised that some Apple customers (like a 30 something engineer friend who has iPhone 6s and uses Garmin for bike rides) still don’t know anything of latest apple watch. 

    watto_cobra
  • Reply 9 of 11
    eightzero said:
    HomePod Mini: nope. That ain't happening.

    A HomePod version of something like the Dot? No, definitely not. But I do think that they could end up doing a somewhat smaller version at a slightly lower price.
  • Reply 10 of 11
    2) HomePod may see some upswing if people really find superior sound and so trade up to multiple rooms and/or "full room"
    apple can always update the homepod to have new features. wasn’t there a leak found in the code that said it would have icons for some features which didn’t eventually upon release. that could come up in a next iteration. even for airpods, apple can always release an updated version that has more controls other than just double tap for each pod. why would apple kill themselves over a stagnant one model line of product?
  • Reply 11 of 11
    brucemcbrucemc Posts: 1,408member
    78Bandit said:
    That's some really sketchy math using total installed base as the foundation rather than expected yearly sales of each product and then expecting the initial adoption rate of a new product to continue indefinitely.  You are using a number that is three times as high as total annual sales and still forecasting revenue growth at the same rate.  If you look at the chart he is forecasting AirPod sales to be almost $6B in 2020 which would amount to 46 million AirPods.  Most customers are going to buy a set of AirPods at the same time they purchase a new phone.  That implies an adoption rate of almost 20% of all new iPhone purchases.

    Same thing by tying HomePod sales to total Apple Music subscribers.  You may get 10% of everybody in the first year, but after that you are looking at 10% of new subscribers plus any people replacing their HomePod.  Unless this guy expects everyone to replace their HomePod yearly his growth rate assumption is highly skewed.

    I don't know about the Apple Watch, but I suspect the HomePod and AirPod sales will stabilize fairly quickly and the revenue growth rates will flatten out just like the Beats revenue looks in the chart.
    Agree that % of installed base - no matter tha value - is just guessing. 

    That said, the category has seen some impressive growth.  What Apple calls wearables (all in Other) was up 75% Q1 2016 to 2017, and a further 70% to 2018 (all Apple FY). The Apple Watch has seen over 50% growth for over a year now YoY.  Estimates are they will pass the 50M units sold this FY. I think tha AW will become independent of the iPhone much quicker than thought, and so becomes a driver for new users.  A refreshed AirPods with updates would keep the growth going for awhile. 

    The math might be a bit voodoo, but the direction is correct. 
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