Shareholders may once again be underestimating the staying power of the company's margins, notes Robert Cyran.
The most expensive new watch on Apple's website is going for $17,000. But $730 billion iPhone maker's market capitalization slid $20 billion during its big reveal of the new gadget on Monday.
Though the Watch starts at a more manageable $349, it's still Apple's most overtly fashion-oriented accessory yet. Shareholders may once again be underestimating the staying power of the company's margins.
Stock punters bid up the company's stock in anticipation as Apple unveiled appetizers such as a new MacBook laptop.
But the excitement faded when boss Tim Cook showed off a watch that seemed more nice-to-have than necessary. The whopping price tags on the high-end gold models mostly set off derision among social media mavens.
The main selling point for the watch - so far - appears to be that it's easier, faster and more convenient to display some information on your wrist than pulling out a smartphone. People loaded with bags and wishing to display their electronic boarding pass at an airport might agree.
Health apps, aided and abetted by the Watch's sensors, could catch on. But Apple will need more than a handy, decorative iPhone remote controller to move the needle on its top line, which was $183 billion last year. Hence the overt emphasis on materials, fashion and style.
Breathless videos about metalworking, the deployment of former supermodel Christy Turlington Burns as a pre-launch adopter of Watch and the recent heightened - and artfully managed - media profile of Apple design chief Jony Ive all add to the effect.
The pricing is another facet. No one should rationally pay $10,000 or more for a device with functionality that's no different from a $349 version.
Yet fashion houses have long known that some buyers salivate over the exclusivity of high prices and that top-of-the-line items can drop stardust on more affordable cousins. This is the expertise of Angela Ahrendts, the former Burberry boss who joined Apple last year to lead its retailing efforts.
Apple's stock ended Monday's regular trading hours up slightly on the day. But the apparent investor disappointment as details of the Watch emerged may be misplaced.
Luxury fashion retailers - Burberry, for instance - command higher valuation multiples than Apple's. Even without an uplift, though, Cook and his cohorts have shown an uncanny ability to keep margins buoyant on goods with high price tags.
The time to bet against Apple may be when it announces a chintzy $100 watch, not a handsome one at a hundred times that price.
On March 9, Apple unveiled its new MacBook and disclosed new details on the Apple Watch.
The Apple Watch Sport will start at $349, the standard version starts at $549 and there is a select Apple Watch Edition starting at $10,000 and running to $17,000.
Apple's watches can be ordered starting April 10.
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.