An unassuming $350 product could decide whether Apple is overpriced
Apple will introduce a home hub on October 13 that will add barely a percentage point to revenue. Yet it could move the stock—trading at 38 times earnings—more than a new iPhone, and European investors have reason to watch it especially closely.
Key points
On October 13, Apple will introduce a device that will add less than one percent to its revenue
The stock trades at 38 times earnings; historically for Apple it has been around 30
The new hub is the first product in the company's history that makes no sense without the new Siri
Its predecessor at almost the same price was discontinued after three years
Siri AI still doesn't work in the European Union and Apple has offered no timeline
A product no one will find in Apple's numbers
On Tuesday, October 13, according to Bloomberg, $AAPL is planning an event where it is finally expected to show its home hub—a six-inch display with a speaker that controls the home, plays music, handles video calls, and serves as a family calendar. The expected price is around $350, well above the competing Echo Show from Amazon or Google's Nest Hub.
Now the most important thing every shareholder should know: financially, this is a triviality for Apple. If the company sold 10 million units a year, which would make the hub one of the most successful smart displays in history, it would generate about $3.5 billion. With annual revenue around $470 billion, that's less than one percent. The entire global market for smart speakers and displays is estimated at roughly $15–17 billion a year—about what Apple earns in two weeks.
The Wearables, Home and Accessories segment, where the hub will fall, is also one of the slowest-growing parts of the company. In the last reported quarter it grew 6% to $7.9 billion, while iPhone added 22% and Mac 29%. And the market Apple is entering isn't a gold mine even for those who dominate it: Amazon $AMZN, according to the Wall Street Journal, lost $25 billion on its devices division including Alexa over five years.
So why even talk about a box that gets lost in rounding in the company's results? Because it's not about the product itself. It's about what Apple is testing with it for the first time.