HomePod Unlikely To Move The Needle For Apple, But Still An Important Product

by Trefis Team
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Apple (NASDAQ:AAPL) recently launched its first smart speaker, the HomePod. Unlike Amazon and Google, which have kept the price points on their smart speakers as low as $50 (and even lower with limited-time promotions) in order to maximize their installed bases and drive traffic to their e-commerce and search operations, Apple appears to be focusing on design and sound quality as its device is priced at $350.  We don’t expect the HomePod to move the needle for Apple financially. That said, the device should help lock customers into the Apple ecosystem, as it only works with iOS devices, with its voice recognition features also designed to work exclusively with the Apple Music service. Moreover, as speakers generally have much longer replacement cycles compared to smartphones (2-3 years), the HomePod could improve stickiness around Apple’s lucrative iPhone and services businesses.

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We have created an interactive dashboard analysis outlining the potential sales of the device based on Apple Music subscriptions. You can modify the drivers to arrive at your own estimates.

How Much Can HomePod Impact Financials? 

Apple reportedly has about 36 million subscribers to the Apple Music service currently. If we assume that 5% of these subscribers buy a HomePod, it would translate into shipments of 1.8 million. At an ASP of $350, this would imply that revenues from the product would come in at just about $630 million, which is a drop in the bucket for Apple, considering its $250 billion+ in expected revenues for 2018. Even if that number increases to 20% of Apple Music subscribers (which would be impressive) that would still only boost the company’s total revenues by around 1%. You can modify these estimates and forecasts on our dashboard to see how much of an impact the product can have on Apple’s earnings and valuation.

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