In a good news for Apple Inc (NASDAQ:AAPL) stock investors, iPad and Watch sales are going strong.
Shares of Cupertino based tech giant Apple Inc (NASDAQ:AAPL) has rallied over 50% in the last one year. Apple stock has been hitting a new high every other day as the company marches towards the one trillion dollar market capitalization goal. Expectations of an iPhone supercycle and the strong growth in its services segment have been the key drivers behind AAPL stock rally. Apple is set to launch its 10th anniversary iPhone issue during the September 12th event. Rumours have been flying high regarding the features which the new iPhone, which is likely to be priced around $1000, will have. While iPhone and services have been the main drivers, Apple will need other business segments to chip in as well, to help it hit the trillion dollar mark. The recent earnings and following analysts commentary have highlighted two products which could help Apple - iPad and Apple Watch.
iPad sales bounce back after three years.
Apple's third quarter earnings were generally good, with the company delivering a beat on both the top and the bottom line. However, one area which really surprised everyone was iPad sales. For the first time since 2013, iPad sales registered year on year growth. Apple sold 11,45 million iPads in the quarter, up 14.8% from 9.95 million units the company had sold in the same quarter in 2016 and good for 28% QoQ growth. Though, revenue rose at a slower pace of 1.9% indicating that most of the iPads sold in this quarter were below $399 range. More than half the consumers in several countries were first-time buyers. The company also achieved the highest global market share in over four years based on IDC's latest estimate of the tablet market. The demand from the education sector was also very strong. Sales were up 32% year over year to over 1 million units in the education segment.
Management was very bullish on the iPad segment during the earnings call saying: "Our iPad product lineup is stronger than ever. The new iPad we launched in March offers great value and performance. And the all-new 10.5-inch iPad Pro, launched in June, features the world's most advanced display with ProMotion technology and is more powerful than most PC desktops."
The company is promising to take iPad experience to next level after iOS 11 launch. iPad will have features such as a customizable dock, Multi-Touch drag and drop, powerful new multitasking, more efficient QuickTime, and great new markup and scanning capabilities. Not surprisingly, a majority of prospective tablet customers intend to buy iPad. According to research report quoted by the management during the earnings call, among those planning to buy tablets, purchase intent for iPad was over 70%. The pick up in iPad sales bodes well for Apple.
Apple Watch sales remains strong.
Another piece of hardware which could contribute to Apple's revenues growth is its smart watches. Apple Watch didn't have a start to remember. However, sales of Apple Watch have picked up of late. Sales of Apple Watch were up over 50% in the June quarter. According to IDC, in the second quarter of FY 17, Apple shipped around 3.5 million watches, 48% higher than 2.3 million shipments that the company had made in the same quarter last year. While the growth rate was lower than what company had registered last year, it saw significant improvement in the market share. According to the IDC report, Apple's market share in the wearables segment jumped from 9.6% last year to 13% in the quarter in June 2017.
The growth trend is expected to remain strong n 2018. According to DigiTimes, Apple will ship 4.5 million watches in the Q4 to take overall shipment in 2017 to 15 million. Shipments are expected further jump by 33% in 2018 to 20 million. Apple Watch sales could get a further boost if the rumors about the upcoming model are true.
Apple is expected to launch Apple Watch Series 3 on September 12 along with the iPhone. There were rumors that Watch will come with a cellular connectivity. Though a rent report by KGI Securities analyst Ming-Chi Kuo suggests that Apple Watch will have and LTE connections, which will allow for data transfer, but no calls. Either way, it is going to be a big upgrade and could drive the already strong demand for Apple Watch higher.
Apple Inc currently has several revenue growth drivers, from the upcoming iPhone to services segment, iPads and the wearables segment. The tech giant is also throwing its hat in the media business with a one billion dollar commitment for producing original content. Apple stock is part of our top stocks to buy portfolio which has returned over 139%.