Apple looks to build on strong end to 2020

Erika Beras Jan 27, 2021
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The pandemic has made electronics more important for those working or learning from home. Jenny Evans/Getty Images

Apple looks to build on strong end to 2020

Erika Beras Jan 27, 2021
Heard on:
The pandemic has made electronics more important for those working or learning from home. Jenny Evans/Getty Images
HTML EMBED:
COPY

We can expect to see fiscal first quarter results from Apple on Wednesday. Sales of electronics have been up throughout the pandemic, and this particular tech giant seems to have a knack for creating demand for things customers might not have asked for, to help at work, school and with self-care.

For a while there, it seemed like every time a new iPhone or iPad was released, Apple users would go out and get it.

But then, said CFRA analyst Angelo Zino, the latest generation of gadgets was no longer a must-have.

“What we’ve seen in recent years is really kind of elongation or expansion of the replacement cycle,” Zino said. “So just more consumers holding on to these devices.”

Zino said that changed because of the pandemic, when people started relying more on personal electronics, regardless of make.

“With individuals working from home more now, or whether it be students learning from home, there’s just more of a need for kind of more powerful devices,” he said.

And different devices. “The importance of a notebook today is much greater than we’ve seen, I’d say, over the last decade,” Zino added.

PC sales have been through the roof this past year, and this quarter includes what analysts expect was a robust shopping season. In addition to computers, people may also have bought the new iPhone, Apple Watch or AirPods.

Analyst Jitesh Ubrani with IDC said that, again, is because lots of people are still at home.

“They need headsets to work with or maintain some level of privacy from other family members, or roommates, or whatever it might be,” Ubrani said.

Apple’s success during the pandemic comes after a rough period where the company, like all electronics companies, dealt with supply chain and distribution issues.

But Apple had and has other products to fall back on, said Third Bridge analyst Scott Kessler. This past quarter saw the launch of Apple Fitness+.

“It’s just a further diversification of the revenue mix, away from hardware and devices and toward services,” Kessler said, “which, frankly, tend to be more recurring in nature and higher margin in nature.”

Apple has also been investing in streaming TV and movies, cloud storage, news and music subscriptions. Kessler said investing in services has two big benefits. First, services don’t rely on traditional supply chains. And second, they keep what Apple makes top of mind.

“Essentially, these services in some ways make the hardware and devices more valuable or more appealing or just more necessary,” Kessler said.

That keeps customers locked into the brand.

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