Rumors broke last week that the high-end version of the Apple Watch—the Edition—would have an 18-karat-gold case and could cost $4,000 or more. Some rumors have the sales price closer to $10,000, or about on par with an entry-level Rolex.
This immediately begs the question: Who in their right mind is going to pay Rolex prices for a kitschy piece of wearable tech that will be obsolete in two years?
Seriously. I get the appeal of a high-end watch with a real Swiss movement. It’s classy and old-fashioned…and it’s something a man can pass on to his son or grandson one day. There is something infinitely appealing about that. But a digital watch that beeps with incoming text messages kinda lacks that timeless appeal.
I’m not an Apple (AAPL) hater. In fact, I’m long the stock in my Dividend Growth portfolio, and I was practically gushing about the company’s cash hoard in an article earlier this month. I love AAPL stock, and consider it a no-brainer to own in an otherwise overpriced market. But I also think investors need a dose of reality when it comes to the Apple Watch.
The Wall Street Journal reported this week that Apple had asked its suppliers in Asia to make 5-6 million Apple Watches for next quarter’s launch, of which nearly a fifth would be the high-end Edition. We’re talking sales of about a million Edition watches per quarter…at anywhere from $4,000 to $10,000 a pop. That’s worth about $4 billion to $10 billion in revenues per quarter—big even by Apple’s gargantuan standards. As a point of reference, Apple pulled in $74.6 billion in revenue last quarter in the biggest quarter in the company’s history. Adding an extra $4 billion to $10 billion is real money.
But is it realistic?
Probably not, at least past the first quarter or two. I have no doubt that out of the approximately 400 million people that currently own an iPhone, some number of them of will gladly fork over $10,000 for a gold Apple Watch. But 1 million sales per quarter over the course of a year would be 4 million Editions…or about 1% of the entire installed base of iPhone users.
