Apple Faces Challenges as PC Sales Decline, but Services Shine
Apple’s AAPL fourth-quarter fiscal 2024 results, scheduled for release on Oct. 31, are likely to reflect the impact of a weak PC market. Nevertheless, consistent growth in the Services sector is expected to counteract this challenge.
PC Market Struggles Amid Ongoing Decline
The PC market experienced a downturn in the third quarter of calendar 2024. According to a recent IDC report, PC shipments totaled 68.8 million, marking a decrease of 2.4% from the previous year. Conversely, Gartner reported shipments at 62.997 million units, representing a decline of 1.3% year over year.
Among PC vendors, Apple has faced the toughest time. IDC ranks Apple as the lowest-performing PC vendor, revealing a staggering decline of 24.2% in Mac shipments year over year. In contrast, Gartner adds that Mac shipments may see a slight increase of 3.5% year over year, closely trailing Acer Group.
Click here to find out more about Apple’s upcoming fiscal fourth-quarter earnings results.
Apple’s Fiscal Health in Numbers
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Weak Demand Affects Traditional PC Manufacturers
Traditional PC manufacturers such as Lenovo (LNVGY), HP (HPQ), and Dell Technologies (DELL) are also grappling with diminished shipments. IDC projects Lenovo and HP’s shipments to grow by 3% and 0.4%, respectively, while Dell anticipates a 4% decline. ASUS is expected to lead with a 10% growth in shipments.
Similarly, Gartner ranks Acer Group at the top position with an anticipated growth of 4.4% in shipments. While HP’s shipments may rise by 0.3%, Dell expects a sharper decline of 3.9%.
The Zacks Consensus Estimate for fiscal fourth-quarter Mac net sales is projected at $7.43 billion, indicating a year-over-year decrease of 2.4%.
Services Growth Expected to Boost Revenue
Apple’s Services sector is poised to benefit from an expanding user base for the App Store and rising viewership of Apple TV+. There has been remarkable growth in subscriptions for Apple Music, Apple Arcade, Apple News+, and Apple Card.
While Apple’s primary revenue source remains the iPhone, its Services division has emerged as a significant contributor, representing 28.2% of sales in the third quarter of fiscal 2024.
As of the end of the last fiscal quarter, Apple had over 1 billion paid subscribers in its Services portfolio, and this number is expected to have grown further in the upcoming quarter, aided by the increased adoption of Apple devices and popular apps like Apple TV+.
The Zacks Consensus Estimate for fiscal fourth-quarter Services net sales stands at $25.759 billion, reflecting a year-over-year growth of 15.4%.
Growth in iPad Sales Continues
iPad sales contributed approximately 8.3% to Apple’s net sales in the third quarter of fiscal 2024. The strong demand for the iPad Pro and the introduction of 11-inch and 13-inch iPad Air models led to a significant year-over-year sales increase of 23.7%, reaching $7.16 billion. This upward trend is expected to persist in the upcoming quarter.
The Zacks Consensus Estimate for fiscal fourth-quarter iPad net sales is projected at $6.984 billion, indicating an expected year-over-year growth of 8.4%.
Zacks Rank Insights
Currently, Apple holds a Zacks Rank #3 (Hold). A complete list of Zacks #1 Rank (Strong Buy) stocks can be found here.
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