3 Numbers Apple Inc.'s Investors Should Ignore

By Markets Fool.com

Apple investors are constantly bombarded by headline-grabbing numbers from tech and finance sites. Some numbers -- like iPhone sales figures -- matter, but plenty of other comparisons and forecasts don't. Let's take a look at three frequently cited figures which are actually meaningless for long-term Apple investors.

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Source: Wikimedia Commons, CrypticC62.

1. Market share
iPhones account for 11.7% of the global smartphone market, compared to 84.4% for Google Android, according to IDC.

However, it's pointless to compare Apple's smartphone market share directly to Android's. Apple only sells two phones per year, compared to hundreds of different Android devices from various manufacturers. Direct comparisons between Apple and Samsung are also pointless, because Samsung sells dozens of Android phones. Even with so many devices on the market, Samsung's market share slipped from 32.2% to 23.7% between the third quarters of 2013 and 2014, due to rising competition from Chinese rivals like Xiaomi.

The only meaningful matchup is one between Apple's iPhones and Samsung's flagship S5 and Note 4. The S5 was outsold by Apple's older iPhone 5s during its first fullmonth of sales. Samsungsold 4.5 million Note 4 units within the first month, but Apple sold 10 million iPhone 6 and 6 Plus units during the first weekend.

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Lastly, market share is distorted by the rapid growth of the smartphone market. For example, Applesold 20.7 million iPhones in 2009 and claimed 14% of the smartphone market, according to Gartner. In 2014, Apple sold 169.2 million iPhones, but that actually represented a slightly smaller share of the overall market.

2. Hardware comparisons
The smartphone market is filled of so-called "iPhone killers" which boast better hardware than Apple's at a fraction of the price. One closely watched device is Xiaomi's Mi Note, which closely resembles the iPhone 6 Plus.

CPU

RAM

Rear camera

Display

Price

iPhone 6 Plus

1.4Ghz Dual-core

1 GB

8-megapixel

5.5 inch, 401 ppi

$749 (16GB)

$849 (64GB)

$949 (128GB)

Mi Note

2.5Ghz Quad-core

3 GB

13-megapixel

5.7 inch, 386 ppi

$370 (16GB)

$450 (64GB)

Source: Industry websites.

Yet comparisons like these don't matter for two reasons. First, Samsung, Sony , HTC , and other Android manufacturers have traditionally sold smartphones with higher specifications than iPhones at lower prices, but their devices generally lack the iPhone's cult appeal as a status symbol. As long as the iPhone is a status symbol, many consumers won't care if Apple's hardware is outdated or not. That indifference gives Apple an ideal mix of high margins and unit sales that its rivals struggle to replicate.

Second, all of these high-end rivals run on Android. Since iOS is closed source, Apple never has to compete against a third party iOS device. If consumers are locked into iOS, they upgrade in a straight line to the next generation of iPhones. Cheap Android devices with high specs compete against each other instead of Apple. That's why Samsung is now quickly losing market share to Xiaomi as it fails to overtake Apple.

3. Apple Watch forecasts
Wall Street's sales forecasts for the Apple Watch are all over the map, ranging from 10 million (Gene Munster, Piper Jaffray) to 60 million (Katy Huberty, Morgan Stanley) units within the first year. Research firm ON World claims that shipments of smartwatches will surge from 4 million units in 2013 to 330 million in 2018. But the truth is that no one really knows how many watches Apple will sell.

The reality is that the wearables market remains tiny and interest remains low. Samsung controlled 71% of the global smartwatch market last year by only shipping half a million units per quarter, according to Strategy Analytics. Moreover, a December UBS survey found that only 10% of respondents were "very likely" to buy a smartwatch.

At a base price of $350 (excluding premium bands), selling 10 million to 60 million Apple Watches would generate $3.5 billion to $21 billion in annual revenue. But hitting the low to mid range of those estimates would still be a drop in the bucket for Apple, which is expected to post $213 billion in revenues in fiscal 2015.

Apple Watch. Source: Apple.

The Apple Watch might be a hit or a flop, but forecasts are meaningless until more consumers actually buy and stick with wearables.

Watch the balancing act
Apple is in the middle of a tough balancing act -- it needs to offset lower iPad sales with stronger iPhone and Mac sales, but it also needs to prepare for the iPhone's eventual decline by launching new services like Apple Pay, HealthKit, and HomeKit.

Keeping tabs on that balancing act matters, but investors shouldn't be distracted by misleading headlines about Android's market share, "weak" hardware specs, and unsupported forecasts about the Apple Watch.

The article 3 Numbers Apple Inc.'s Investors Should Ignore originally appeared on Fool.com.

Leo Sun owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.