The power of world 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 rose, but now Apple faces a new challenge from the pandemic: constrained supply chains.
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Apple is having a hard time meeting 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 the $64.7 in sales for the same quarter last year. But that doesn’t tell the full story of how strong customer demand was for Apple’s products and services 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 the strength of Apple’s sales in the fourth quarter, it could have been 7.2% higher.
The limitations are felt throughout the entire family of Apple products. It was not 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 start of the pandemic: customers buy all of its products. In the latest quarter and 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 Christmas sales season yet. Unfortunately, Apple is not expected to solve the supply shortage problem in time. CFO Luca Maestri spoke about the hit from supply constraints on the conference call following Apple’s fourth-quarter earnings release: “As previously reported, during the September quarter, supply constraints hit our revenue by approximately $6 billion. We estimate that the impact of supply restrictions will be greater during the January-December 1 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 hits its EPS forecast, it will be 12.5% higher than the same quarter last year.
The year-over-year growth estimates are the lowest for Apple in the previous four quarters. Investors are already anticipating the hit from supply chain shortages and have cut the cap for the first quarter. Therefore, management’s control over supply chain effects over the next few quarters is likely to move Apple’s stock.
If management says something similar to what CFO Luca Maestri said earlier (the problem is getting worse), Apple’s shares could drop in the short term. Regardless, Apple is an excellent company that keeps up with customer demand through innovation. Short-term problems, such as supply chain restrictions caused by the pandemic, are not a reason to sell Apple stock.
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