Apple, Inc. Dominates Smartwatch Sales

By Daniel

Ahead of Apple's launch of its first smartwatch earlier this year, analysts were debating how many devices the tech giant could sell. With little substance in the nascent category to extrapolate any estimates from, estimates varied widely. While Apple hasn't disclosed specific data on Apple Watch sales, some forecasts of how many units the company has shipped so far suggest Apple will likely fall short of expectations.

This doesn't mean investors should write off Apple's new product line as a failure, though -- far from it. Indeed, despite a slower-than-expected start, the category still looks promising.

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Estimates versus reality In a survey of polled analysts by Fortune's Philip Elmer-DeWitt after the Apple Watch was unveiled, one thing was clear: Analysts had big expectations for the new device.

On average, analysts expected Apple to sell about 23 million Apple Watch units during calendar 2016, according to Fortune's survey. The lowest estimate was for 10 million, and the highest was for 60 million.

How many Apple Watch units has the company actually sold? An estimated 7 million in Q2 and Q3 (Apple began shipping Apple Watch in the first month of Q2) combined, according to research and analyst company Canalys.

With only an estimated 7 million Apple Watch units sold so far, achieving sales of 23 million units in calendar 2015 appears unlikely. But the company does look poised to outperform the most bearish outlook for device shipments of 10 million units.

The scorecard Seven million units between Q2 and Q3, however, is more impressive than it seems. As Canalys notes, this figure is "in excess of all other vendors' combined shipments over the previous five quarters."

Notably, however, wearable bands, or connected fitness bands, such as Fitbit bands, are selling in higher volumes. Fitbit alone sold 9.3 million connected health and fitness devices, most of which were connected bands, in Q2 and Q3 combined. But investors shouldn't let data on this cousin category of smartwatches trick them. The average selling prices of these devices are likely far lower than the average selling price for Apple Watch. Fitbit bands, for example, start at $100, while Apple Watch pricing begins at $349. Apple, therefore, leads manufacturers of both smartwatches and wearable bands by a wide margin when measured by revenue.

In short, while this category may be small, Apple undoubtedly dominates it.

What should investors make of the beginning of Apple's foray into this new category?

Apple Watch. Image source: Apple.

Apple's smartwatch product line is increasingly looking like a potential catalyst for further sales and earnings growth. But based on how small these sales are as a portion of Apple's revenue, and how the category's growth seems to be closer to the lower end of analysts' expectations, it's going to take time for the segment to be meaningfully accretive to Apple's business.

Going forward, investors should tune into Apple's comments on Apple Watch when the company releases its fiscal first-quarter (the fourth calendar quarter) results. As Canalys notes, Apple's holiday quarter could offer "a barometer of the strength of the nascent smart watch market."

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Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Apple. 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.

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