If Apple is to top outstanding 2020 financial results and nudge Apple stock price higher this year, the company will probably need to continue innovating at a dizzying pace. The challenge will be particularly tough for the Mac over the next few quarters.
Despite strong performance as of late, the segment is about to face some of its toughest challenges of the past several quarters. Will Apple’s recent upgrades to its laptop and desktop portfolio be enough to keep demand (and device shipments) afloat?
The M1 revolution
Apple’s big tech transformation of the past 12 months has arguably been the introduction of the internally designed M1 chip, announced in June 2020. The faster, space- and energy-efficient component has allowed Apple to launch vastly improved 13-inch laptops and a Mac Mini in November.
Since then, the Cupertino company has moved forward and upgraded other Mac models with its M1-enabled architecture. Most recently, during the company’s Spring-Loaded event, the new iMac with Apple’s own silicon was introduced.
Expect the rest of the Mac lineup to be next, including larger versions of the MacBook Air and Pro, possibly in the summer 2021. These devices might even be loaded with the second-generation version of the M1 chip, which will likely be named the M2.
The challenges ahead
The less bullish news is that, as Apple marches into the second fiscal half of 2021, the Mac will start facing increasingly tough comps (see chart below).
Preliminary numbers on global PC shipments have started to come in – and they are not particularly encouraging, in part due to these tough pandemic-era comps. Digitimes Research notes that top vendor sales, excluding Apple, have dropped by 4% and 8% in May and April, respectively. Only isolated pockets of strength have been observed in the education and enterprise verticals.
2021 is shaping up to be quite different from last year. From the perspective of shorter-term financial performance, Apple benefited from the stay-at-home trends brought about by the COVID-19 crisis in 2020, particularly its Mac segment. While the digital transformation is unlikely to reverse course, it will probably slow down in a post-pandemic “return to normal”.
Lastly, the global component shortage has become another important drag to expectations. A self-reinforcing cycle of high demand for tech products and disrupted supply chains leading to increased producer prices has been highly disruptive to device manufacturers. The impact to product availability, prices and margins for the remainder of 2021 has yet to be fully assessed.
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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)