Apple stock has a steep hill to climb this earnings season, given the many headwinds in the holiday period. But could the Mac segment look better than feared and save the day in Cupertino?
- This is the fourth article in our Apple earnings preview series. Today, we talk about the Mac, a segment that could outperform the rest of the company.
- Mac shipments in the holiday quarter may have dipped only about 2% YOY. This is good news relative to the rest of the PC industry, which continues to struggle.
- Apple stock (AAPL) – Get Free Report investors can follow the company’s fiscal Q1 earnings event on this channel in real-time, via live blog, on February 2 starting at the closing bell.
(Read more from the Apple Maven: Apple Stock: iPhone Sales May Surprise In Fiscal Q1)
Apple’s Mac: Sectorwide Headwinds
Those that have been following the Apple Maven’s preview of the Cupertino company’s earnings day must have already noticed the pattern. Fiscal Q1 should be a rough holiday quarter for CEO Tim Cook & Co.
Pressuring the entire company are factors like (1) severe supply chain constraints, particularly around assembly lines in China; (2) a global economy that seems to be cooling off slowly; and (3) an FX drag that, granted, may not be as bad as originally anticipated.
If these were not enough, Apple’s Mac segment could suffer from sector-wide challenges that have been lingering for many quarters. According to research company Canalys:
“The global PC market faced further headwinds in Q4 to round out what has been a difficult 2022. […] With rising costs for energy and basic goods in key markets like the US and Europe, expenditure on big-ticket items like PCs has taken a back seat as consumers are prepared to delay refreshes.”
The Mac Could Still Perform Well
But despite overall PC shipments having declined by a whopping 28% to 29% in the 2022 holiday period, depending on which research company you ask, the Mac has fared much better than its competitors once again.
At the most upbeat end of the spectrum, research company IDC reports that Apple shipped 7.5 million Mac units in Q4 for a modest YOY decline of only 2% (see table below). This being the case, Apple’s market share has jumped three percentage points to over 11%.
The results could have been better, considering 2021 comps that are the easiest to beat since mid-2020 (see chart below). The problem this quarter is that the timing of certain product launches means unfavorable seasonality for Mac revenues.
As I explained about three months ago, Mac revenues looked good in fiscal Q4 partly because of the July announcement of a new MacBook Air equipped with the M2 chip. The segment also benefited from channel fill, after sales growth came in at the lowest point in 15-plus quarters.
Neither of these positive factors are likely to play a significant role in fiscal Q1, unfortunately.
In Summary: The Mac May Not Disappoint
To be clear, Mac sales growth is likely to be muted in fiscal Q1, if not negative. But remember what matters this earnings season: results delivered vs. expectations.
Analysts project Apple’s total company sales and EPS to drop by low-to-mid single digits in percentage terms, a first since early 2019. Given this context, the Mac segment could look better than feared this quarter, proving once again that Apple can still perform solidly despite softness elsewhere in the PC industry.
We have recently asked Twitter, about Apple’s fiscal Q1 earnings report that is scheduled to be released on February 2: “which segment do you think will perform best relative to expectations?” You can still participate and share your opinion.
(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)