Apple’s Fiscal Q4 Earnings Preview: How Will Mac Perform?

With Apple stock  (AAPL) - Get Free Report still down 21% for the year, the Cupertino company is gearing up to report fiscal Q4 results. As promised, the Apple Maven will publish a series of daily previews ahead of the October 27 event, which I will cover in real-time via live blog – don’t miss out!

Today, I talk about the Mac segment. Will Apple deliver decent growth on top of fairly easy 2021 summer comps (see chart below)? And more importantly, can this business help to fuel a rally in AAPL share price?

Read more from Apple Maven: Apple Q4 Earnings: Countdown Begins, Here Are The Key Numbers

Apple earnings: Mac likely a stronghold

Research company IDC may have spoiled the fun ahead of earnings day. According to one of their recent reports, Apple was the only winner among the top five players in the personal computer space in calendar Q3.

The Cupertino company allegedly shipped over 10 million Mac units between July and September, for astounding YOY growth of 40%. The PC space in general, Apple included, saw unit sales decline 15% instead. See the table below.

What probably helped Apple in the quarter was the launch of its M2-equipped MacBook Air in July. The device has been lauded as “the biggest design overhaul to the MacBook Air line since 2010”.

As the reader probably knows, revenue is a function of unit sales times price. If we know (or have good reasons to believe) that the former increased by 40% YOY, the missing piece is the average selling price. Here, the question becomes: how much of an impact did heavy Air sales have on the revenue mix and, as a consequence, ASP?

As the image below illustrates, the basic version of the M2 MacBook Air sells for about $1,200. The figure is about $100 below the price of two of Apple’s other popular models: the M2 MacBook Pro with a 13-inch screen, and the 24-inch iMac.

Simplifying a bit, one can say that a heavy mix of cheaper MacBook Air might be detrimental to the average selling price. Therefore, I would not be surprised to see Mac revenues in fiscal Q4 rise YOY by 35% to 38%, contributing $3 billion to total company revenues – or 4 percentage points in top-line growth.

Can Mac lift AAPL share price?

The next question is: can the Mac segment deliver impressive-enough results to bump Apple stock higher? Of course, it depends on how strong of a print we are talking about.

Generally, Mac accounts for only 10% of total company revenues (see below). Personal computers are unlikely to be central in many investment theses, even though the product category experienced surprisingly robust demand during the COVID-19 period.

Therefore, I think that strong growth in Mac can be the icing on the cake of a potentially solid quarter that will probably have to be driven by the iPhone. Mac is more likely to be a supporting rather than a leading actor in this story.

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(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)