Mac Sales Could be Slowing but Small Impact on Apple’s Stock

According to a recent report from Global Equities Research, Apple’s (NASDAQ:AAPL) Mac sales have slowed significantly since the fourth week of July, suggesting Apple’s back-to-school promotion is not boosting sales as much as expected. ^[1]

Interestingly, the report directly contradicts another report from UBS Investment Research that Mac sales have done well recently. Regardless of which report is more accurate, a slowdown in Mac sales will have a limited direct impact on Apple’s value since Mac accounts for only around 12% of our $510 price estimate for Apple’s stock. Our price estimate is about 40% above market price, and investors should note that the iPhone-iPad combo is much more valuable and accounts for around two thirds of Apple’s stock value.

Apple has done decently well in the PC market …

The poor Mac sales report from Global Equities Research comes as a surprise as Mac sales have been consistently done better than the overall PC market.  As per the above chart, we expect Apple to sell about 17 million Macs this year, after having already sold 7.7 million Macs in the first two quarters of this year. In terms of Apple’s share in the notebook PC market, we expect it to continue to grow.

… While the broader PC market continues to struggle

The PC market has struggled over the last few quarters as tablets have started to cannibalize PC sales. Last week’s news of HP (NYSE:HPQ) considering spinning off its PC business signifies this struggle while other PC players like Dell (NASDAQ:DELL) are also experiencing pressure on sales and margins. According to IDC, worldwide PC shipments managed growth of only 2.6% in Q2 2011 compared to the same quarter last year. In the U.S., the situation was even worse with a year-over-year decline of 4.2%. ^[2]

Minimal impact on Apple’s stock from Mac sales slowdown

We believe that weak Mac sales (as suggested by Global Equities Research) will not have a material impact on our $510 price estimate for Apple stock.  If Mac notebook sales were to maintain growth in line with the overall PC market, or in other words, if Mac notebook share remains flat, the downside impact to our Apple price estimate would be about 3%.

See our complete analysis for Apple stock here

1. Apple has seen ‘significant’ slowdown in Mac sales, AppleInsider quoting Global Equities Research analyst Trip Chowdhry as the source, August 17th, 2011 [↩]
2. Global PC market report for Q2 2011, IDC, July 13th, 2011 [↩]