Will the Apple Watch be Apple’s Most Profitable Product Ever?

When the Apple Watch became available for purchase on April 10 in the US, every model was sold out within hours. Watches sold now are facing shipping delays of over a month. In China, the $20,000 gold Apple Watch Edition reportedly sold out in less than an hour. There’s no doubt that the Apple Watch is already a resounding success for the company, but market research analyst Carl Howe predicts that the Apple Watch may turn out to be Apple’s most profitable product yet.

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Based on a mix of several sources, Howe estimates that an initial run of 3 million watches will have been produce revenue of $2 billion after the first two weeks of sales. His prediction states that of the watches sold, 1.8 million will be the Sport model, 1.3 million will be the stainless steel Apple Watch, and 40,000 will be the luxurious Apple Watch Edition. The stainless steel version will lead in revenue, garnering $900 million, with the Sport model and the gold Edition model earning $675 million and $500 million respectively.

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Howe believes that, although it may not sell as many units as the iPhone, the Apple Watch may “become Apple’s most profitable product line ever, with gross margins exceeding 60 percent.” The reason for such a high profit margin, according to Howe, is the pricing model across the different styles of watch. Although the electronics in each watch are the same, the stainless steel and gold models carry a much higher price tag than the Sport model. Although the more expensive Apple Watch Edition may sell substantially fewer units, it will still garner a tremendous profit because of its high price.

 

As for the initial short supply of the watches, Howe believes Apple produced a limited initial run to gauge the popularity of the different case sizes, styles, and bands among users. It is expected that Apple will up the production of the watches in the coming months, although Howe still expects “Apple Watches to be on back order through much of summer”.

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