The power of global technology An apple (NASDAQ: AAPL) It will announce first-quarter earnings for fiscal 2022 on January 27. The company has been one of the main beneficiaries of the coronavirus pandemic, with people spending more time than usual at home.
Sales and profits are up, but now Apple is facing a new challenge from the pandemic – constrained supply chains.
Apple is having a hard time keeping up with demand
For the fourth quarter of the fiscal year ending September 25, Apple reported $83.4 billion in revenue. That was 28.9% higher than $64.7 in sales for the same quarter last year. But that doesn’t tell the full story of how strong customer demand for Apple products and services was in the fourth quarter. Management indicated that it could have sold an additional $6 billion worth of products had it not been for supply shortages. Despite Apple’s sales strength in the fourth quarter, it could have been 7.2% higher.
The limitations are felt across the Apple family of products. It wasn’t the case that a popular new product was sold out, everything else was available in abundance. This has been the case for Apple since the beginning of the pandemic – customers buy all of its products. In the last quarter and last fiscal year, sales grew in all four product categories (iPhone, Mac, iPad, and wearables).
The first quarter of Apple’s fiscal year 2022 will consist of its most lucrative holiday selling season. Unfortunately, Apple is not expected to solve the supply shortage problem in time. Chief Financial Officer Luca Maestri discussed the blow from supply restrictions on the conference call following Apple’s fourth-quarter earnings release: “As previously reported, during the September quarter, supply restrictions impacted our revenue by approximately $6 billion. We estimate that the impact of supply restrictions will be greater during the January quarter. Dec. 1. Despite this challenge, we are seeing increased demand for our products and we expect to deliver very strong year-over-year revenue growth and hit a new revenue record during the December quarter.”
What this could mean for Apple investors
Wall Street analysts expect Apple to report $118 billion in revenue in the first quarter and earnings per share (EPS) of $1.89. If Apple reaches its EPS forecast, it will be 12.5% higher than it was in the same quarter last year.
Year-on-year growth estimates are the lowest for Apple in the previous four quarters. Investors are already anticipating the blow from supply chain shortages and have cut the cap for the first quarter. Therefore, management’s hold on supply chain effects for the next few quarters is likely to move Apple shares.
If management says something similar to what CFO Luca Maestri indicated above – the problem is getting worse – Apple’s stock could drop in the near term. Regardless, Apple is an excellent company that maintains customer demand through innovation. Short-term issues such as supply chain restrictions caused by the pandemic are no reason to sell Apple stock.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
“Wannabe internet buff. Future teen idol. Hardcore zombie guru. Gamer. Avid creator. Entrepreneur. Bacon ninja.”