The Apple Maven continues its preview of the Cupertino company’s fiscal third quarter earnings day. So far, we have discussed (1) Wall Street’s expectations for revenues and earnings and (2) the expected performance of the iPhone in the quarter.
Today, we address what could be Apple’s most successful product category in the third fiscal period of 2021: the iPad.
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The 2020 pandemic has made winners of tech companies that managed to capitalize on shifting consumer behavior – also known as the “stay at home” trends. This partially explains why iPad revenues have shot through the roof in the past several quarters: growth of at least 30% since fiscal Q2 last year.
For starters, it has become increasingly obvious that consumers are not returning to old spending habits, even as the COVID-19 crisis gets closer to an end. Therefore, I see no reason to doubt that iPad sales will impress once again this time, although the growth rate will be partially eclipsed by tough 2020 comps.
But the story does not end with the effects of the pandemic. The chart below shows that, since around 2017, Apple has been able to reignite demand for its tablets. Even in 2019, before the pandemic turned the world upside down, iPad sales had already been growing at a respectable 13% pace.
The rebirth of the tablet business, I will be frank, caught me by surprise. The phenomenon can be probably attributed to technological advancements allowing products like the iPad to better replace personal computers (more storage, better graphics, fast processor speed) and even smartphones (wider range of screen sizes, better cameras, introduction of 5G capability).
Case in point, Research and Markets believes that tablet revenues across the industry will continue to grow at a CAGR of over 10% through 2023. This is quite an improvement from the days that iPad sales were declining sharply, between 2014 and 2018.
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Lastly, Apple may have performed even better than its tablet competitors in the most recent quarter. First, the company has proven more capable of managing its supply chain, which could be a plus during times of component shortages.
But also, Apple released its new M1-equipped iPad Pro in April. Consumers have been more willing to pay up for better mobile devices lately, which might bode well for Apple’s top-of-the-line tablet. In fact, the iPad’s two percentage point gain in market share in June could be explained by this product launch.
With the most recent tablet release, the entire iPad lineup (except for the less relevant mini version) is only about nine months old today. On the back of a strong product portfolio, the iPad could very well be the brightest star on Apple’s fiscal third quarter earnings day.
The Apple Maven believes that the iPad could be Apple’s best performer in fiscal Q3. Which other segment do you think is most likely to outshine the iPad this time?
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