Supply chain fears loom over Apple earnings, but most major analysts are standing by the stock

Published Wed, Oct 27 20212:22 PM EDTUpdated Wed, Oct 27 20213:31 PM EDT

While demand for Apple 's signature product — the iPhone — is believed to be strong, supply chain pressures continue to cause havoc across various industries and the tech giant will likely be no exception. This has caused some analysts to urge caution heading into Thursday's results, but most say it's an excellent time to buy the dip. With shares of the company up just 13% this year, investors will be watching to see if the tech giant provides guidance. It has declined to do so in previous quarters. Other key areas of note include product updates as well as Wearables growth and Apple Services, which includes things like Apple TV+ and the App Store. Here's what the analysts say: "We expect a beat," Citi analyst Jim Suva said firmly of the earnings report. Suva noted that Apple was likely to be cautious and probably wouldn't issue guidance, but that the firm still sees more upside in the stock. "We maintain our Buy rating with +15% upside to the stock but this will be driven by fundamental upside to sales, EPS and cash flow rather than valuation multiple expansion," he said. The sentiment was similar at JPMorgan. "We expect Apple to report solid F4Q (Sep-end) beat, led by solid demand for iPhone 12 series, Macs as well as Services, but expect investor attention to be focused on guidance for F1Q (Dec-end) in light of the recent concerns relative to supply," analyst Samik Chatterjee said. Morgan Stanley's Katy Huberty kept her overweight rating but said that this earnings report ultimately doesn't matter. "While we remain bullish on Apple's FY22 outlook and expect estimates to move higher post F4Q21 earnings, we just don't see earnings alone as a material stock catalyst," Huberty wrote. The investment bank added that its view on the stock is "constructive" and that it doesn't expect any kind of formal guidance from Apple. Meanwhile, Bernstein's Toni Sacconaghi said he sees the stock's valuation as "relatively full." He noted earlier this week that, for Apple, it's simply "all about the iPhone." "Historically, Apple's Q4 earnings results are not particularly important, but forward commentary/guidance is, as investor focus typically shifts to next year's iPhone cycle." The firm says it sees a solid quarter but it may not be enough for investors. "The key question for Q4 earnings is whether Apple will provide Dec quarter guidance, and/or what the company might say about the strength of the iPhone 13 cycle and any supply issues," Sacconaghi wrote. Apple reports after the bell Thursday. Bank of America- Neutral rating "We expect Apple to report a strong F4Q21 and model revenue of $86.6bn, which compares to Street at $84.6bn. This is despite limited selling days in the qtr for the new iPhone 13 models. ... .Given the limited number of selling days in the F4Q, we expect demand for iPhones to spill into the Dec qtr, and for F1Q22 to be incrementally stronger. ... .Although shares have underperformed the broader S & P500 YTD, we expect the valuation multiple to compress at the first sign of negative estimate revisions." DA Davidson- Buy rating "We see three potential catalysts for shares over the next 12-month period: stronger-than-expected operating results from 1) continued growth iPhone sales (it remains Apple's most significant product) thanks to 5G; 2) better-than-expected results from its newer initiatives, including the Apple Watch and Apple TV+ as well as its other service efforts; and 3) an accelerated repurchase effort and increase in dividends following the changes to U.S tax code." Deutsche Bank- Buy rating "While data points around the time of the iPhone 13 launch suggested demand was healthy, recent news on supply constraints will likely pressure AAPL's near-term results. We therefore expect AAPL to report F4Q results that are below our above-consensus estimates, and we also see downside risk to DBe/Street's F1Q estimates. ... .AAPL's shares have largely traded in line with the S & P 500 over the past three months, but we believe solid iPhone demand in a more stretched-out peak selling season should lead to outperformance of AAPL going forward." Bernstein- Market perform rating "Historically, Apple's Q4 earnings results are not particularly important, but forward commentary/guidance is, as investor focus typically shifts to next year's iPhone cycle. ... .The key question for Q4 earnings is whether Apple will provide Dec quarter guidance, and/or what the company might say about the strength of the iPhone 13 cycle and any supply issues. ... .We believe that Apple's valuation is relatively full today given the company is trading inline to higher than other FAAMG stocks both of which not only have better expected growth, but also higher margins." Evercore ISI- Outperform rating Apple should report modest upside to Sept-qtr expectations despite concerns around supply headwinds as we think AAPL had largely procured enough capacity for the initial launch. We are forecasting ~30% y/y growth in the Sept-qtr and margins should also remain elevated with strong iPhone mix and Services growth. Our iPhone delivery tracker points to continued increases in iPhone lead times, which likely indicates strong initial demand for the iPhone. App Store data indicates revenue grew ~18%, which would be consistent with the prior quarter." Wedbush- Outperform rating "Our favorite large cap tech name to play the 5G transformational cycle is Apple, with the 1-2 punch of its massive services business and iPhone product cycle translating into a $3 trillion market cap for Cupertino during 2022 in our opinion. Right now Apple has a supply constraint, with a high class problem of demand outstripping supply for the biggest product cycle Cupertino has experienced in roughly a decade with now two new launches (Mac Pro, AirPods 3) adding to these growth tailwinds." Barclays- Neutral rating "We think builds point to a weaker Sep-Q, following stronger than expected Jun-Q and Mar-Q for AAPL. We are estimating AAPL product revs up 17% Q/Q in September-Q compared to the 2017 – 2019 average of up 20% while the Street is expecting 16% growth Q/Q. given that trends are well below normal seasonality based on the combination of the AAPL estimate expectations and builds outlook, we believe it indicates a slightly weaker September quarter for AAPL product revenues." JPMorgan- Overweight rating "We expect Apple to report solid F4Q beat, led by solid demand for iPhone 12 series, Macs as well as Services, but expect investor attention to be focused on guidance for F1Q in light of the recent concerns relative to supply. ... .We continue to see strong demand for iPhone 13 and 5G iPhone SE relative to low investor expectations to act as a catalyst, the timing of realization of which, although delayed on account of supply headwinds, is unchanged in magnitude." Citi- Buy rating "We expect a beat. ... .We do not expect Apple to give guidance for the December quarter given COVID and supply chain challenged. We maintain our Buy rating with +15% upside to the stock but this will be driven by fundamental upside to sales, EPS and cash flow rather than valuation multiple expansion." Morgan Stanley- Overweight rating "And while we are constructive on the December quarter outlook despite recent negative supply chain headlines, we don't expect Apple to provide a formal revenue guidance range and instead speak to segment-level growth trends as they have done for the last 6 quarters. ... .So, while we remain bullish on Apple's FY22 outlook and expect estimates to move higher post F4Q21 earnings, we just don't see earnings alone as a material stock catalyst."

Tim Cook introduces iPhone 13

Source: Apple Inc.