A significant swath of the Wall Street analyst community and financial press seem determined to prove that the Apple (NASDAQ:AAPL) Watch is a failure: even if it means ignoring key facts and context.
A story by MarketWatch columnist Brett Arends with the blaring headline "Apple Watch Sales Plunge 90%" epitomizes this attitude. There was a nugget of truth behind Arends' headline -- a sales estimate from Slice Intelligence -- but it was ripped out of context in order to mislead readers.
The big claim
The MarketWatch story picked up on data from Slice Intelligence, which has been monitoring U.S. Apple Watch sales by tracking e-receipts sent to a large sample of consumers. The story noted that "Apple has been selling fewer than 20,000 watches a day in the U.S. since the initial surge in April, and on some days fewer than 10,000 ..."
Even if Apple were selling 20,000 Watch units every day, that would equal 140,000 per week. This compares to Slice Intelligence's estimate that Apple sold 1.4 million Apple Watches in the U.S. during the first week of pre-sale availability: hence the claim that sales were down by 90%.
Arends did caution that it was understandable for sales volume to fall after the initial rush. But by then, he had already made it clear that the "point" of the article was that Apple Watch sales were plummeting. To make matters worse, he went on to claim that this was an ominous sign, writing: "Investors are used to seeing new products, such as the iPhone and iPad, fly off the shelves as soon as they are launched."
Apple Watch demand still healthy
First of all, the data from Slice Intelligence says more about the vast crowd of early adopters than about a lack of ongoing demand.
As noted above, the firm estimated that Apple sold 1.4 million Apple Watches during the first week of online availability (which began on April 10). After that initial surge, Slice's data shows weekly sales staying fairly steady in a range of roughly 150,000-175,000 per week through the week of May 31. That suggests Apple had sold another 1 million or so Apple Watches by the end of May.
It was only in June that Apple Watch sales in the U.S. apparently plummeted to 100,000 or less per week. Even so, domestic sales for the quarter reached perhaps 2.8 million units, according to the Slice Intelligence data.
But Apple only got 38% of its revenue from the U.S. in its most recent fiscal year. Last quarter's Apple Watch sales may be skewed more toward the U.S. because the device only launched in a few markets in April. That said, those markets also included Apple's biggest international markets, such as China, Japan, and the U.K.
If there was a 50/50 split between the U.S. and foreign markets for Apple Watch sales last quarter, that would imply global Apple Watch sales of about 5.5 million units. That's near the upper end of the range of analysts' sales estimates for the Watch.
Blowing away iPhone sales
If Arends is right that investors are accustomed to new Apple products "flying off the shelves," that's only because investors have faulty memories. Between the launch weekend and first full quarter of sales of the original iPhone, Apple sold just 1.4 million units globally. If you believe Slice Intelligence's data, Apple sold that many Watches just in the U.S. within a week, and total Apple Watch sales for the quarter could be about four times that number.
Meanwhile, Apple sold 3.3 million iPads in the quarter when that product category launched five years ago. Of course, iPhone and iPad sales have soared far higher in subsequent years -- but as the Apple Watch improves, it could also grow in popularity.
Is the drop even real?
Thus, even if Slice Intelligence's data is accurate, Apple Watch demand has been perfectly healthy so far. Launch quarter sales may outpace iPad launch quarter sales by a sizable margin, just as the iPad got off to a faster start than the iPhone.
Yet it's possible that the "90% slowdown" picked up by Slice Intelligence (and fixated upon by the MarketWatch column) is partially an artifact of its data-collection method. It's surprising that Apple Watch sales would have held steady around 150,000-175,000 per week for a month and a half before suddenly plunging to half that level.
However, the Apple Watch started to become available in stores in mid-June. As of June 17, Apple allowed customers in the U.S. to reserve the Apple Watch online for an in-store demo and (hopefully) purchase.
Recall that Slice Intelligence tracks sales volume via e-receipts. While Apple does send e-receipts for many in-store purchases, it's possible that a shift in customer buying behavior (in favor of the Apple Store rather than online) is making the drop in Apple Watch sales look worse than it is.
We won't know for sure how the Apple Watch is doing until Apple reports June quarter earnings later this month. Even then we might not find out much, as Apple hasn't committed to providing unit sales data. But Apple Watch pessimists should at least wait until Apple gets a word in before condemning the Watch as a failure.