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The Drop in iPad Sales Isn’t a Problem for Apple Stock

There's no reason for AAPL stock holders to worry about the company's waning tablet sales

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They say a picture is worth a thousand words. If it’s true, then the picture of how Apple (AAPL) iPad sales have cooled off in recent quarters paints a mildly alarming picture.

Granted, Apple stock clearly hasn’t been adversely impacted — AAPL is up 20% year-to-date as strong sales of the iPhone have adequately offset waning tablet sales figures. Still, anyone who owns AAPL shares for the long haul should be wondering what the company plans to do should iPhone-mania cool to merely moderate levels.

iPad Sales Are Lackluster … Again

Last quarter, iPad sales fell more than 9% to a multiyear low of 13.28 million. That was a little more than 9% below the previous quarter’s iPad sales total. It also was the second sequential decline in iPad sales after peaking at 26.04 million in fiscal Q1 2014.

Data provided by Statista

Data provided by Statista

Apple stock owners have seen similar sales contractions before, not just from the iPad but from the always-popular iPhone as well. However, this is the first time we’ve seen the sales trough for either of its key products make a new quarterly low.

Even if iPad sales snap back as they have in the past (and as they always seem to for the iPhone when a new iteration is launched), the trend has to leave Apple stock holders wondering two things:

Is there something fundamentally, competitively wrong with the iPad?

And if so, can it be fixed?

iPad Impediments

To give credit where it’s due, Apple largely established and defined the tablet space when it debuted the first iPad in 2010. And it’s still the market share leader by brand. Apple owned 36% of the tablet market in 2013, and still owns a comparable portion of the market — two-thirds of tablets sold run Google’s (GOOG) Android, sure, but that’s across multiple manufacturers. Only Apple makes iOS-powered iPads.

So why are iPad sales declining?

Realistically, it’s a combination of factors, one of which is sheer slowing growth of the global tablet market. Gartner forecasts that tablet sales will increase by “only” 24% this year, versus a 68% growth rate in 2013. That’s still growth, but the more the market matures, the more competition can chip away at the iPad’s market dominance.

Another reason: While iPads are portable and fun, and make games and Facebook readily accessible, they can cost more than a low-end computer system — and still do less than a typical computer system. Sometimes it’s not about portability, as some consumers have decided after the manic stage of the product’s lifecycle died down.

Yet another potential reason iPad sales are struggling is, their superior quality makes them last longer, and the performance of even an older iPad can still be just as solid as that of a new Android tablet. Andreessen Howowitz’s Benedict Evans says the average iPad is used for a couple of years, versus a lifespan of only about a year for an Android machine.

The biggest impediment of all for the iPad, however, might be its more popular brother: the iPhone.

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Article printed from InvestorPlace Media,

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