The Apple Maven continues to preview Apple’s fiscal third quarter earnings season. Up to this point, we have addressed the following topics:
- Wall Street’s expectations for revenues and earnings;
- The expected performance of the iPhone in the quarter;
- How the iPad could be the star of the show this time;
- What history says about trading AAPL around earnings day.
This time, we turn to a less encouraging piece of news regarding the Mac segment. Research company IDC reported that the increase in personal computer shipments continued in the second calendar quarter of 2021. However, growth has decelerated sharply from the previous quarters.
(Read more from the Apple Maven: History Says: Buy Apple Stock Before Earnings)
Good news first
IDC’s numbers on Q2 PC sales can be interpreted in a couple of ways. The good news is that shipments increased by 13% year-over-year. This is not bad, considering that desktops have been disrupted by laptops, which in turn have been disrupted by powerful mobile devices in the past years.
Also, keep in mind that the supply chain has been impacted by the shortage in tech components, as global economies jumpstart their activities following the worst of the pandemic. On top of 11% growth in Q2 of last year, the most recent quarter’s numbers seem far from disastrous.
Now, the bad news
That said, Apple did not look particularly good on IDC’s most recent report. First, the Cupertino company is believed to have lost market share since this time last year: 7.4% vs. 7.6%. The sub-10% growth in Mac shipments only lagged the performance of HP’s devices among the top 5 vendors (see table below).
Second, from an investor sentiment perspective, Apple may have the most to lose. The Cupertino company delivered jaw-dropping growth in the Mac segment in 2020, leading some to believe that substantial market share gain was possible. Now, the bar has been set high – see chart below.
To fight increasingly tough comps in the next four quarters, Apple will have its disposal a refreshed lineup of MacBook Air, Pro, Mac mini and iMac, all equipped with the new M1 chip and updated within the past eight months. Whether the renewed product portfolio will be enough to maintain momentum in Mac sales through the next year remains to be seen.
(Read more from the Apple Maven: Could The iPad Be Apple’s Best Performer in Fiscal Q3?)
Recent price action
On a day that saw the S&P 500 and the tech-rich Nasdaq rise 0.3% and 0.2%, respectively, setting new all-time highs, Apple stock dropped 0.4% on July 12. The decline in share price may have been driven primarily by the Mac news.
Another possibility, however, was the G20’s efforts over the weekend to enact a global minimum tax plan that would impact Apple directly. This may also explain why peer Amazon saw its share price decline modestly on a green day for the broad market.
Per research shop IDC, PC shipments increased year-over-year in the second quarter, but growth has decelerated sharply. Are you concerned about Apple’s ability to keep Mac sales momentum in the next few quarters?
Is the price right?
Looking at a company’s business fundamentals is only half the work needed to find a good stock. How much one pays to own the shares is a key factor in the success of any investment. This is why valuation analysis is so important.
Alpha Spread’s user-friendly platform allows you to estimate a stock’s fair value –through valuation multiples, discounted cash flow, and more. I believe that the service is a must for anyone looking to own the right stock at the right price. Check out alphaspread.com and get started with a 7-day free trial.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)