Apple Sells 1 Million Videos Stock Up $3.05 per Share Simply amazing! Apple sells 1 million videos and the stock is up $3.05 right now.
So let’s take a look at the math here. Apple’s download service is new. Who knows how many people downloaded videos just to try them out. But aside from this, let’s assume that of the $1.99 that Apple charges per download that they get to keep half. I’m not sure what the real number is, but let’s assume that it’s half.
If you average out the downloads per day, you get roughly 1,578,947 downloads per month. Now lets assume that Apple continues the momentum of their downloads and in fact each month has a 2% increase in videos sold.
By the end of 12 months under this analysis, Apple would have sold a little over 21 million downloads. Now if Apple gets $1 per download (and I have no idea what the number is) they would make about $21 million from selling downloads. Of course there is incidental cost above and beyond the payment to the content provider, but let’s say Apple cleared $20 million in earnings on their downloads.
So Apple’s stock is up $2.5 BILLION dollars in market cap on what potentially could be $20 million in earnings. This is on top of the fact that the stock today is already at a new 52 week high and trades at almost 40 times earnings with no other major news out on the company today.
Whew! Can somebody say bubble? Forget about what I think about their download technology (it sucks in my opinion — who wants low res versions of tv shows at $2 a pop). Even if I’m wrong and people turn out to love watching low res downloadable tv shows and music videos, there is simply no way, even with stratospheric growth, that today’s run up is justified. Perhaps this is just the beginning and Apple will be making higher quality shows available in the future, etc. etc. And I know they are making decent money off their iTunes and iPod sales, but this is just plain nuts.
It will be interesting to see where these download numbers sit (as well as their stock price) in six months.