Apple Pre-Earnings: Is Apple Wearables Optimising the Show?

Apple Pre-Earnings: Is Apple Wearables Optimising the Show? ...

As Apple's earnings day approaches, the Apple Maven continues to investigate the key issues that are likely to take center stage. So far, I have explained how and may still do very well despite tough comps, while services are likely to increase total company margins.

Heute, I face off two segments that often fly under investors' radar: (1) iPad and (2) the diversified wearables, home, and accessories industries. This may be beneficial to increase revenue and investor sentiment this quarter?

Figure 1: Apple Pre-Earnings: Could iPad or Wearables Steal The Show?

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iPad and wearables are on the rise in the last decade.

The iPad is a key business in Apple's portfolio, according to some investors. I will not argue against the notion, but I believe that wearables, home, and accessories deserve at least as much attention.

Growth in the wearables and home sector was recorded in a quarterly average of 29 percent since the start of fiscal year. By contrast, iPhone growth was a far less timid 8%. Even services managed to increase revenues by 22% in the period, on average.

iPad is one of the most successful products in increasing revenues, second only to wearable and home, according to the quarterly average of 19%. These peaks and valleys have been far apart this time last year, and at -14% in the most recent quarter, implying lumpiness in sales. See graph below on the left.

Figure 2: iPad growth and wearables growth.

DM Martins Research

The iPad and wearables segments have grown at an unusual rate in the past couple of years. The potential culprit: supply chain problems that have hampered Apple from meeting demand.

Headwinds are still possible.

Apple's iPad, the Watch, and even AirPods (whose sales have increased in the last year or two) are excellent businesses. Wearable devices, particularly, might see a demand revival impulsed by the post-pandemic "return to normal."

Despite the fact that I find it premature to place optimistic betting at this point for the following reasons:

I am not expecting much from these two segments that account for nearly one-third of Apple's total income. In fact, the iPad will be faced with tough 2021 comps. The YOY change is even likely to be negative, if it is the only reportedable product category to experience this time.

I believe that the iPhone, Mac, and services would deliver outcomes beyond expectations. iPad and wearables are, at best, the most popular games in the quarter.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. The article may also include affiliate links. These partnerships do not influence editorial content. Thanks for supporting Apple Maven)

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