Enterprise iPad Sales Could Drive Apple Stock Upward
Despite the fact that Apple Inc. (NASDAQ:AAPL) stock is suffering from the company’s slowing sales, the tech giant is seeing a spike in sales from another corner of the market. Its enterprise customer base, meaning companies that purchase products for their employees to use, is growing rapidly.
As companies across the globe continue to innovate the ways they run their operations, their leadership teams are increasingly ditching large personal computers (PCs) for their workforces—and are instead opting to provide employees with mobile devices like the “iPad.” According to Forrester Research, Inc. a Massachusetts-based market research firm, almost half of iPads sold are being purchased by companies and governments for non-personal use.
“Apple is stronger in the enterprise market with its devices than it is with consumers,” noted Frank Gillett, an IT sector analyst with Forrester.
Apple Inc’s recent fiscal year ended back in September, and during that 12-month period, its sales to other corporations—including both equipment and services—racked up to $25 billion. Despite the fact that those sales figures made up just 11% of Apple’s total sales revenue, the number increased by 40% compared to the previous fiscal year. (Source: “Once Taunted by Steve Jobs, Companies Are Now Big Customers of Apple,” The New York Times, August 7, 2016)
Picking Up the Slack from Slumping iPhone Sales
Apple’s revenue dropped 15% lower in its most recently reported quarter, falling from $49.6 billion (in the same three-month period last year) to just $42.4 billion. (Source: “Apple Reports Third Quarter Results,” Apple Inc, July 26, 2016) In fact, it was the second quarter in a row that the tech giant reported a decline in year-over-year sales. Its second fiscal quarter, which ended in March, was the first time in 13 years that it did not post sales growth. “iPhone” sales fell by 15% year-over-year.
Apple’s iPhone sales have dragged in recent quarters after the company launched the “iPhone SE”—which stole sales from the company’s larger, pricier iPhone models. Apple is also beginning to see more of its sales revenue coming from its services, rather than gadgets, as about a third of its revenue last quarter came from “App Store” sales, “Apple Music” users and “iCloud” storage sales. Apple’s services revenue jumped 19%, compared to the same quarter last year, which has put pressure on AAPL stock. (Source: “Apple’s iPhone Sales Drop Again, but Services Are a Bright Spot,” The New York Times, July 26, 2016)
Thankfully, corporations are looking to Apple’s products more and more for their workforce to use. For example, British Airways has already developed over 40 custom iPad apps for its employees. The company’s former rival, International Business Machines Corp. (NYSE:IBM), has even built over 100 enterprise-related applications for Apple’s operating system—and has sold these apps to more than 2,000 companies. Even companies like Lowe’s Companies, Inc., a home improvement retail chain, have been using Apple’s technologies in its day-to-day operations.
What Better iPad Sales Mean for AAPL Stock
The good news is that companies have only touched the tip of the iceberg when it comes to using Apple’s mobile equipment to transform their operations. “For the vast majority of enterprises, mobile usage extends to email, contacts and calendars,” said Van Baker, an analyst with Gartner, a mobile tech market research firm. This means that the sky is the limit for future iPad implementation in the corporation’s daily business activities. (Source: The New York Times, August 7, 2016, op cit.)
Apple stock, which has already been on an upswing this month, will almost certainly benefit from the increasing amount of enterprise customers using iPads in their day-to-day operations. As iPad and Apple’s app software continue to become vital for corporations to run their businesses, iPad and Apple Inc’s service sales are likely to continue moving upward. Investors should keep an eye on the rate companies are implementing Apple’s solutions into their operations, because the company may just become the go-to for global corporations’ workforces. The future is full of exciting potential, as Apple becomes more and more of a necessity for companies worldwide.
All of which is good news for AAPL stock.