Deepwater Asset Management's managing partner, Gene Munster has predicted that Apple Inc.'s AAPL iPads will witness a significant surge in sales this year, however, the future might be a bit difficult.
What Happened: On Tuesday, Munster shared his insights on the future of iPads saying that it will witness an increase in sales in June and September, but the “tailwind will likely fade in 2025.”
In his note, shared on X, formerly Twitter, Munster said that three of the four iPad models have received long-awaited updates, including a thinner design, larger screens, faster chips, and increased memory.
According to Munster, the iPad currently accounts for 7% of sales, a figure expected to rise to 8% within the next year following the updates on Tuesday, before gradually declining thereafter.
“Looking into 2025, I expect the iPad to be on a steady decline of around 2% as the segment is impacted by the reality of infrequent upgrades,” he said.
This trend is attributed to the iPad’s longer upgrade cycle due to its less frequent usage and the modest nature of updates. For instance, the last update occurred in December 2022, coinciding with a 30% sales increase, followed by a 13% decline in March 2023.
“That said, over the next two years, the segment will likely decline by about 2%,” he said.
He went on to highlight the iPad Pro, which accounts for just under 2% of Apple’s total revenue, saw an 18%-20% price increase. If Pro volumes remain unchanged, the price increase could add approximately $1.3 billion to sales over the next 12 months, increasing the overall growth of the company by 0.2%, Munster stated.
The managing partner of Deepwater also pointed out Apple’s surprising pace in introducing new chips, suggesting that the company will use hardware as a competitive advantage in the AI race.
“What surprised me the most from the event was the announcement of the M4 chip, four months earlier than I was expecting," Munster said, adding, "By year-end, I expect Apple will increasingly market its leadership in silicon as an AI competitive advantage.”
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Why It Matters: Apple unveiled the new generation of iPad Air and iPad Pro on Tuesday, with the latter focusing on bringing more power to enthusiasts with the new M4 chip, jumping directly from the M2. The iPad Air 6 also comes in two screen sizes for the first time.
Previously, tech analyst Mark Gurman suggested that Apple should focus on transforming the iPad into a genuine laptop substitute. He argued that Apple has been taking half-measures in this direction and needs to make a firm commitment.
Apple also expanded its Apple Pencil lineup, offering four distinct models with varying features and compatibility. The new model was also announced at the “Let Loose” event and is compatible with the M4 13-inch iPad Pro, M4 11-inch iPad Pro, M2 13-inch iPad Air, and M2 11-inch iPad Air.
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