Apple Earnings Preview: How The iPad Will Perform

The Apple Maven’s pre-earnings coverage continues. Here is what should be expected of the iPad, a segment that has found its footing during the later stages of the COVID-19 crisis.
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The Apple Maven has begun covering the current financial reporting season with a few Apple earnings preview articles. Here is what we have discussed so far:

I begin to dive deeper into what Apple’s numbers might look like in fiscal second quarter, segment by segment. Today, I take a closer look at the iPad.

iPad Pro

Figure 1: The iPad Pro.

Easy comps, low expectations

Apple’s iPad segment will face some of its easier comps in recent memory. Disrupted by the start of the COVID-19 crisis that shut down Apple’s physical locations and slowed down consumer spending, iPad revenues declined 10% year-over-year in fiscal second period 2020.

Unrelated to the pandemic, iPad sales had already failed to impress in the 2019 holiday season, probably due to the timing of the model upgrade and some unfavorable secular trends in tablet demand. The iPad seemed to be in trouble, even before things took a turn for the worse last year.

The comeback in the product category unfolded in the second half of 2020, supported by the well-known stay-at-home and tablet-as-a-PC trends (the latter probably benefitting the iPad Pro the most). Momentum is likely to carry, to some extent, into fiscal second quarter. The new lineup of 8th generation iPad and iPad Air, released in September, could help sales as well.

Figure 2: iPad revenue growth since fiscal 2019.

Figure 2: iPad revenue growth since fiscal 2019.

Having said the above, expectations are set quite low for tablet shipments in general, in the first three months of 2021. In early February, DigiTimes predicted a year-over-year decline of over 30% across the industry.

The research firm believes that the component shortage could play a role in the sales drop. Some vendors, but not Apple, already experienced challenges to fulfill holiday quarter demand due to long lead times in the supply chain.

The Apple Maven’s take

I do not expect the iPad to be a shining star in Apple’s fiscal second quarter. Rather, I see a mixed bag of pros (easy comps, stay-at-home momentum) and cons (component shortage) leading to more modest year-over-year sales increase.

Twitter speaks

I have recently asked Twitter if Apple’s March quarter financial results will beat expectations. Nearly 80% of the poll responses were highly bullish.

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(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)