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And how many Apple Watches have been sold.

By Don Reisinger
July 1, 2016
July 01, 2016

Apple has been silent about how many Apple Watches it’s sold and how big of a business its wearables division is. But one analyst who keeps a close eye on Apple believes he has both figures pegged.

In a lengthy analysis published this week on his Above Avalon blog, longtime Apple AAPL analyst Neil Cybart said that he believes the iPhone maker’s Apple Watch business is worth $10 billion. He added that since the Apple Watch premiered in April 2015, he believes Apple has sold 12.1 million units and generated $5.7 billion in revenue.

“Apple already has a $10 billion Apple Watch business on its hands,” Cybart writes. “This is even before all of the significant changes in watchOS 3 were unveiled on stage at [the 2016] WWDC. Rather than pressing a reset button, Apple is systematically going through the Apple Watch business to fix friction points that developed over the first year. All of this is being done to position the Watch for improved adoption and a valuation much greater than $10 billion.”

Cybart’s estimates are set against claims that Apple Watch has been a failure, that many owners are disappointed with the device, and that Apple is trying to fix problems with it. Some critics have gone so far as to say that people simply aren’t wearing the Apple Watch and its future is uncertain.

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Apple hasn’t done much to help its cause and change critics’ minds. The company has declined to disclose sales figures, forcing analysts, investors, and consumers to guess at how many watches it’s sold and what kind of revenue those sales have generated. While Apple has said that Apple Watch is exceeding its expectations, the company says sharing more information would help its competitors.

While it’s hard to separate fact from fiction in Apple’s world, in December, Apple Watch’s smartwatch market share was at 80%, according to analysts at the Glance conference—not bad for a device that had been on store shelves for less than a year. In April, analyst consensus tagged Apple Watch sales at 12 million units for its first year. To put that into perspective, Apple’s iPhone, which notched more than 200 million units sold in 2015, sold through 6 million units in its first year.

In other words, Apple Watch may not be the failure that some critics have said.

To make that point even clearer, Cybart decided in his analysis to separate Apple Watch from Apple proper and pretend it was its own standalone company. He then based his units sold and revenue figures on hints Apple has dropped during its last four quarterly earnings calls, including the company saying during a call in April that “unit sales of Apple Watch during its first year exceeded sales of iPhone in its first year.”

To come up with a valuation, Cybart decided to use a revenue multiple based on how the rest of the industry performs. He chose Apple, which has a 2.6 price-to-revenue ratio, as well as wearables maker Fitbit FIT , which has a 1.1 ratio. He also included action camera maker GoPro GPRO , which likewise has a 1.1 ratio and represents something he believes Apple has become: “a hardware company with slowing sales, increasing competition, and an unknown future.”

Now armed with what he believes the company’s peers are valued on, Cybart assigned a 1.7 price-to-revenue ratio to “Apple Watch, Inc.” He argued that the slightly higher multiple compared to Fitbit and GoPro is “justified due to Apple Watch’s strength when it comes to appealing Watch bands, stronger customer loyalty, and deeper software and hardware integration.” The result? The $10 billion valuation. And even if he used the same 1.1 multiple for Fitbit and GoPro, it would still value the Apple Watch division at around $7 billion.

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Admittedly, Cybart’s estimates could be wrong, since Apple hasn’t actually released details about Watch revenue. However, it’s one of the deeper dives any analyst has provided so far. More importantly, it finally provides some context on why Apple seems so committed to Apple Watch despite criticism.

In a little over a year, Apple has been able to build what is presumed a $10 billion division with its Apple Watch. While that might be a fraction of the company’s $533.6 billion overall market value, it’s substantial nonetheless. In fact, Apple’s wearables division could be worth more than some of the world’s most prominent technology companies like BlackBerry BBRY , which has a $3.6 billion market cap. It would also make the division nearly as valuable as Twitter TWTR , which is currently valued at around $12 billion.

So, perhaps we should all take a break from the talk of Apple Watch being a flop. If Cybart is even close to correct about how much the company has made with its wearables, the Apple Watch division is doing just fine—and could eventually be a big part of Apple’s future growth.

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