Realistically Sizing Up the Apple Watch’s Impact on Apple’s Income

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By Jacob Maslow

edition-display-bb-201503A lot of the discussions and debates regarding the Apple Watch focus primarily on direct sales. Whether you’re a bull or a bear as far as Apple stock is concerned, the focus has been primarily on how many Apple Watch units the Cupertino-based company can move. This is really shortsighted.

The reality is when the Apple Watch hits Apple stores, there’s also a halo effect. People would go into these stores, and they would probably buy accessories or add-on items. They might upgrade other products. Keep this in mind. This can have a tremendous collateral benefit to Apple sales as a whole. Whether this would be enough to justify further increases in Apple stock prices is another question.

Also, another halo effect that Apple observers should pay attention to is the revenue it generates from smart watch app sales. You have to understand that the Apple Watch is a platform. To run functionalities on the watch, you have to buy apps. These apps for sale generate revenues for Apple as well because they are brought from Apple’s App Store.

Put all these together and this may produce a very hefty halo effect based on the Apple Watch. Whether this is enough to mirror or beat Apple’s historic first-quarter earnings results due to the iPhone 6 remains to be seen. One thing is true, however: There is a tremendous amount of pressure on Apple to maintain its sales volume. Any kind of slippage will prompt a downward analysts’ ratings and potential short selling activity.

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