Gene Munster: Best days are yet to come for Mac and iPad

“Many thought the March quarter was as good as it gets for Apple, with 70% and 79% growth for Mac and iPad, respectively.”

From a note to Loup Ventures subscribers that landed on my desktop Tuesday:

Demand for Mac and iPad over the past 12 months has been strong, propelled by the digital transformation and work- and learn-from-anywhere tailwind. On Apple’s March earnings call, management guided to a $3-4B combined headwind for these two segments in the June quarter due to supply constraints, noting, “we expect to be supply gated, not demand-gated.” Our spot check of Apple lead times suggest the company was right, and that demand is still outpacing supply as we exit the June quarter. Net net, we see the positive demand tailwind as much stronger and more sustainable than any supply headwinds. Estimated delivery dates for some iPad and Mac models are more than a month out:

apple munster mac ipad

Regarding the digital transformation, we’re still in the early stages of a new hybrid paradigm, with businesses, schools, and consumers electing to outfit and upgrade their hardware. Based on this, we believe Mac and iPad can both grow revenue 8%, 7%, 6%, and 4% in FY22, FY23, FY24, and FY25, respectively, which would be above consensus estimates. For context, in the five years leading up to the pandemic, Mac and iPad were generally flat businesses:

apple munster mac ipad

My take: Okay, but to me 8% and 7% seem like a letdown after 70% and 79%, respectively.

15 Comments

  1. Horace Dediu said:
    8% compounding means you double in 9 years. If this applied to your income how bad would you feel?

    12
    June 29, 2021
    • Mark Visnic said:
      Rule of 72 corollary: when consensus is below 8%, 8% means you might double in 4 years. : )

      1
      June 29, 2021
    • Jonny T said:
      I was figuring out how best to alert PED to how bonkers his take was, then I read your comment… Top of the class as usual buddy!

      0
      June 30, 2021
  2. Gary Morton said:
    An interesting forecast from Gene Munster. I have only one relevant data point which was a 12.9in iPad Pro that arrived in mid-June when originally expected early July. Maybe Apple Ops has done better than they initially expected in addressing the backlog.

    The M1 and future Mx Macs are a real wild card. For the cost, they are so vastly superior to any Windows machine in hardware specs alone that the number of future converts from PC to Mac is difficult to forecast. If current rates of conversion continued, Apple could continue to see Mac growth in the 20%+ range for years to come.

    8
    June 29, 2021
  3. Fred Stein said:
    And 8% of 179% is 14% of 2020 #’s.

    The big story is m-series Mac super cycle which includes upgrades of base plus new to Mac buyers

    3
    June 29, 2021
  4. Rodney Avilla said:
    “a letdown after 70% and 79%”

    It’s only a letdown if you expected the 70% to continue. And to expect that, you would have to be completely unaware of the external factors that cause the 70% increase in the first place. Comparing it to the previous 5 yrs, 8% is better than the vast majority of quarters.

    2
    June 29, 2021
  5. Jerry Doyle said:
    Gene M says the best days are yet to come for Mac & iPad. That is not the full story. I long have said Apple’s best days lies ahead. We already new Mac & iPad sales were targeted to grow with the digital transformation & transition of much work to an anywhere environment. What few folk are recognizing are events unfolding in India. India & China essentially has the same population with India poised to surpass China in a few years. Concomitantly, China’s population is graying & slowing while India’s population is young & growing with about 45% of its citizens under the age of 25.

    The US accounts for about 45% of Apple’s revenues. Europe is about 23%, Greater China is about 17% and India 1.2%. When Apple targeted China the size of Apple’s Greater China Business percent of global revenue went from 4% in 2010 to 25% in 2015. (The percent has moderated in recent years).

    The growth potential in India is sizable! The caveat is India’s lack of good digital infrastructure compared with China when Apple ramped up its growth in that country.

    I am looking eastward to India. There lies the land of plenty; and the best days for Apple yet to come. 🙂

    3
    June 29, 2021
  6. Gregg Thurman said:
    OT. re my dropped iPad Pro dropped this morning.

    I am responding on my new iPad Pro with M1. The Spokane Store had 2 in stock in my configuration. Sales Rep said I was lucky as they run out of nearly all models about once per week.

    About the M1 iPad Pro. Wow.

    Last thought, I bought the new iPad forgetting that I had AppleCare on the dropped unit. I never get AppleCare and don’t know why I bought it for this unit, but I did. Brand new replacement arrives this Friday for $49 “deductible”. My M1 iPad gust got cheaper as I’ve now got an iPad to sell.

    4
    June 29, 2021
    • Bart Yee said:
      I’ve added AppleCare to all Apple products I purchase. Considering the relatively small costs and the benefits, I consider it my contribution to Apple’s quarterly service revenues. The beauty is my Apple dividends can more than pay for any new Apple device and AppleCare every single quarter of the year.

      It always feels good to give back a portion of what Apple gives me, it’s a nice positive feedback loop.

      1
      June 29, 2021
      • Kirk DeBernardi said:
        @ Bart Yee —

        My sentiments are the same when it comes to purchasing Apple products.

        It’s the least I can do.

        Also, at a shareholder’s meeting long ago just after Steve had passed away, a shareholder asked Tim Cook what he, as a shareholder, could best do to help Apple as a company.

        Tim paused for a moment and replied, “I think it’s best if you could just be an evangelist about the company’s products and services.”

        Evangelizing I wholeheartedly do. Purchases? Easily doing my fair share there too.

        😉

        1
        June 30, 2021
  7. Daniel Epstein said:
    I agree that many people thought that the March Quarter was “as good as it gets” for Apple although I think it is just the beginning of another up cycle. Of course many people have thought almost every quarterly report has been “as good as it gets” for many years now. Sort of the mindset that Apple had peaked when Steve Jobs passed away. They don’t appreciate what he left as a foundation and how well the company has executed under Tim Cook. I wonder what they think of the Disney company after Walt passed. Going forward I don’t see how the Mac growth will be predictable or limited until the full transition to Apple Silicon takes place and all of us who have old Apple computers start replacing them. Now as to how much actual revenue growth per year that will be I would say Mr. Munster is being conservative. Ipad line may not have as much of a push higher revenue wise than the Mac line but anecdotally I sure have more than a few Ipad’s which are showing their age and am thinking about upgrading. And this is just on a couple of product lines that we expect growth. Apple seems to have growth going on in most or all of its businesses.

    5
    June 29, 2021
  8. Robert Stack said:
    Looking forward re Apple revenue, don’t forget to add in another potentially bigger than expected unknown: sales of AirTags! Like other Apple products, they can’t make ’em fast enough!

    3
    June 29, 2021
  9. Rodney Avilla said:
    My daughter wanted to buy some apple. Last week I told her hold on and it should drop to 132. Moral of the story do not give Stock advice to family members.

    1
    June 29, 2021
    • Jonny T said:
      Never about timing. Always say, long-term.

      0
      June 30, 2021

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