Higher PC sales could be the unlikely growth catalyst for Apple in 2017, which could drive AAPL stock higher in the coming months.
Shares of Cupertino, California-based Apple Inc (NASDAQ:AAPL) had a mediocre run in 2016, delivering a return of 9.94%, similar to the NASDAQ composite's 9.79%. This is very unlike Apple, and of late things have not been that rosy for the company. In fact, things have been so bad that venture capitalist Peter Thiel asserted that "The age of Apple is over" in an interview with the New York Times. AAPL stock also did not have a great start to 2017, rising by a meager 2.78% YTD. There is so much negative buzz around Apple Inc lately, with news, among others, of a cut in iPhone production, slumping iPhone sales, and a cut in Tim Cook’s compensation as Apple missed performance goals. ComputerWorld recently reported a Gartner research report stating Microsoft’s OS supremacy over Apple would end in 2017. Though PC sales are on the decline for the fifth straight year, this could be much needed good news for Apple Inc and may even drive the AAPL stock higher in 2017. Here's why.
PC segment to be an unexpected tailwind in 2017?
Even though there is a lot of negative sentiment around Apple's Macs, worldwide Mac sales remained steady in Q4 2016 amid continuing PC market decline. According to the report,
"During the fourth quarter of 2016, Apple shipped an estimated 5.4 million Macs worldwide, up from 5.3 million in the year-ago quarter for an estimated growth of 2.4 percent. During the quarter, Apple held 7.5 percent of the market, up from 7 percent during the fourth quarter of 2015, making it the number five PC vendor in the world."
The above data highlights the fact that things don't look as bleak for Apple, as is being projected. A Forbes article states that Apple has still maintained its no 4 position in the U.S PC market and Apple is only marginally behind market leader Lenovo, in terms of market share. All this, even after the likes of Consumer Reports among others came out with negative initial reviews for Apple's latest Macbook Pro machines. With Tim cook recently reaffirming that the company will seriously update and revamp the Mac series in 2017, the author of the Forbes post opines that "it shouldn't be too difficult for Apple to climb up the pole to third place by the time the 2017 holiday quarter is over."
Further, the latest Macbook Pro machines from Apple have got a recommendation from Consumer Reports after the company fixed the battery issue reported by the latter. This could also be a much-needed boost for Mac sales in 2017. As iPhone sales are declining, a steady performance in PC segment or any increase in PC sales could be a welcome tailwind for Apple.
ZDNet reports that 'Apple plans to release a new 15-inch MacBook Pro with Intel's next-generation Kaby Lake processor and "desktop class" RAM, later this year, according to KGI Securities analyst Ming-Chi Kuo'. Kuo, who has often been right about Apple, expects that the 15-inch MacBook Pro will be "the most significantly redesigned product this year." He lists out further details about Mac updates in the report. If these reports turn out to be true, then Apple could see an improved top line in 2017. As reported earlier, Mac OS devices are expected to overtake Windows OS devices in 2017. This could mean an increase in PC sales for Apple, in spite of the declining PC market, given that Apple's latest Mac update rumors are positive.
It was also reported that Microsoft's Surface Studio sales were growing at the expense of Apple, due to Apple's latest MacBook Pro battery issues. With the battery issue resolved, MacBook sales could bounce back and recapture the market share lost to Microsoft. Further, given the latest MacBook update rumors, one has reason to be optimistic. MacBooks are very popular among the professionals and its popularity is rising in enterprises. The enterprise market could be an unlikely growth segment for Apple in 2017. (See Also: Apple Inc. Cuts iPhone Production, Time To Sell AAPL Stock?)
Investors have not been impressed by AAPL stock lately. Also, the recent spate of negative news about Apple Inc has also not helped much. However, many believe that the emergence of Apple's Services segment as a clear growth driver and the iPhone 8 Super Cycle make Apple stock a good buy for 2017. Apple's PC segment, iPads and Macs combined contribute more than 20% of its revenues. If the above reports are true, improved PC shipments in 2017 could substantially shore up Apple's top line. This could be a welcome tailwind for AAPL stock and give investors one more reason to be optimistic about the company's future. Investors need to watch Apple closely in this space, to make a better assessment of Apple stock in 2017.
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