The Apple Watch Is Just 'Noise' Distracting Investors From These Bigger Issues

Apple Inc. AAPL's Tim Cook is being praised by fans and investors for launching Apple's first new product category in his tenure as CEO. According to BGC analyst Colin Gillis, however, coverage of the Apple Watch is all noise.

Gillis was recently on CNBC to discuss what is he looking for in the device and why investors should focus on the iPhone instead.

Sustainability

"Let's put it in perspective: They are going to sell millions of these out of the gate, it's going to be a multi-billion dollar revenue stream in its first quarter," Gillis said. "So, for any product launch that's a success.

Related Link: Analyst: Apple Watch May Not Be A Threat To Garmin After All

"But longer term...what we want to see is: what's the sustainability going to be for this watch?" he asked.

Apple Watch: It's All Noise

In terms of sales distribution, Gillis said he thinks the "skew may be toward the low-end," but the crux of his discussion rested on the idea that the Watch is "all noise" to shareholders. Even blowout product sales would represent just 5 percent of Apple's total revenue, he added.

The Real Issues

"If you are an Apple investor, you have to be much concerned about iPhone channel inventory, iPhone in China, and their capital return program," Gillis said.

Goldman Sachs discussed inventory earlier this year, while Cantor Fitzgerald analyst Brian White said iPhone sales in China have been driven by “jam-packed” stores.

Many are also expecting a dividend boost this year.

"We can talk all we want about the Watch, but it's not really going to move the stock, not in the near term. It's great for Apple to be in wearables, but this is not the savior for the income statement."

Apple reports earnings on April 27.