With parents and students opening up their wallets before schools and colleges open their doors for the new semester, investors should keep a close eye on tech companies Apple, Amazon and eBay, which are poised to ride the massive back-to-school spending wave.
While Silicon Valley has recently felt the strain of cautious enterprise spending, consumers can pick up some of the slack this time of year. According to the National Retail Federation, combined K-12 and college spending is expected to reach a combined $83.8-billion (U.S.) in 2012, up from $68.8-billion in 2011.
For Apple, this means tapping the phenomenal popularity of its gadgets amongst schools and students, while online retailers Amazon and eBay are looking to grab fresh e-commerce dollars.
“I think both Amazon and eBay are very nicely positioned for back to school,” noted Sandeep Aggarwal, Internet analyst at research firm Digital Route, in an e-mail to TheStreet. “Both are riding the e-commerce adoption and, in the case of eBay, sizable investments in mobile and traction for Paypal are providing further tailwind.”
From backpacks to books, online shoppers are expected to spend significantly more than traditional shoppers before colleges and schools reopen, according to The National Retail Federation. Consumers using the Internet for their purchases are estimated to spend an average of $874 on back-to-school supplies, 27 per cent more than the overall shopper average.
Read on for more details on why Apple, Amazon and eBay are top back-to-school tech stocks:
Market Cap: $588.41-billion
Apple makes it onto the list of top ‘back to school’ tech stocks thanks largely to the iPad’s growing popularity. Despite missing analysts’ top and bottom line estimates in its fiscal third-quarter results last month, the tech giant sold a massive 17 million iPads during the quarter, an 84-per-cent hike on the same period last year.
Specifically, the iPad is enjoying phenomenal success in schoolrooms and college dorms. During the third quarter, Apple sold just under a million iPads into the education sector, setting a new quarterly record. “The adoption rate of iPad in education is something I’d never seen from any technology product in history,” noted Apple CEO Tim Cook, during the firm’s earnings conference call.
Apple, it should be noted, also enjoyed record Mac sales to U.S. education institutions during the quarter, but sold twice as many iPads into the space.
Analysts predict that Apple’s rumoured plan to launch a smaller and cheaper version of its existing tablet will boost its education footprint.
“We believe an ‘iPad Mini’ would further the company’s efforts in this vertical,” explained Topeka Capital Markets analyst Brian White, in a recent note. “The continuing demand for the tablet device highlights the disruptive potential of the iPad and we expect a lower priced ‘iPad Mini’ device to be released this fall, significantly expanding Apple’s market opportunity.”
There’s also Apple’s eagerly anticipated next-generation iPhone, which could make its debut in the coming weeks. With speculation mounting that Apple may launch the so-called iPhone 5 on Sept. 12, the Cupertino, Calif.-based company could get the new phone into the hands of college students shortly after the start of the semester.
Research data from the Pew Internet & American Life Project, the University of Colorado and Nielsen, compiled by OnlineColleges.com, cites Apple’s iOS as college students’ favorite mobile operating system, way ahead of Research in Motion’s BlackBerry OS, Google’s Android and Microsoft’s Windows Phone.
Clearly, there’s massive pent-up demand for the new iPhone, as evidenced by the recent lull in iPhone sales as consumers await the device. Already touted as potentially the biggest product launch in Apple’s history, the new iPhone could serve as one of the big catalysts driving the company’s stock beyond Friday’s closing price of $621.70. Topeka’s White, for example, has a price target of $1,111 on Apple.
While the new iPhone’s impact may not be fully felt during Apple’s fiscal fourth quarter, investors would be foolish to underestimate the smartphone’s appeal for younger consumers, particularly the back-to-school crowd.
Market Cap: $105.56-billion
The back-to-school quarter is always a key one for online retailer Amazon, which has become a valuable resource for students and their parents.
“So far as back-to-school stocks go, Amazon would definitely be on my list,” explained Charles King, principal analyst of Pund-IT, in an e-mail to TheStreet. “Not only has the company become the de facto source for students to buy gear of every sort, including electronics (laptops and packages, as well as entertainment devices) but the increasing availability of electronic textbooks should give the company’s book and Kindle sales a boost.”
Amazon is also said to be preparing an imminent revamp of its Kindle tablet product line, which could potentially bolster its back-to-school, and also its holiday season, revenues. Rumours have been swirling for some time that Amazon plans to launch a 10-inch version of the Kindle Fire, larger than its existing 7-inch devices, and closer in size to Apple’s iPad.