Reports Q1 2022 results on Thursday, January 27, after market close
Income forecast: $118.68 billion
EPS forecast: $1.89
When Apple reports quarterly results later today, Apple (NASDAQ:) will need to demonstrate that supply chain disruptions that affect its ability to sell more hardware are waning. Otherwise it will be difficult for the world's most valued company to stop a decline in its shares and prove to investors that the multiples are still at reasonable levels.
Apple Weekly Chart
In line with the broader market, Apple shares have fallen in recent weeks. After hitting a record high of $182.94 in early January, the iPhone maker lost about 12% of its market value, closing at $159.69 a share on Wednesday.
In October, during the company's latest issue, Chief Executive Officer Tim Cook warned that semiconductor shortages were impacting virtually every product the Cupertino, California-based company makes in its global factories, though demand remained robust .
In addition, Cook stressed that the shortages, along with the COVID-19 restrictions, delayed shipments of the company's flagship iPhones and other popular gadgets, amounting to a loss of about $6 billion in potential to sell. ]
Record Holiday Season
Despite supply chain hurdles, Apple is still on track for a record holiday season, with analysts forecasting 6% sales increase to $118.68 billion in the last three months of the calendar year.
But there's some consensus that it won't be the blockbuster quarter Apple originally envisioned. Shortages and delays in delivery have frustrated many consumers. And with inflation and the Omicron variant bringing new setbacks, consumer confidence could also decline.
According to Bloomberg, Apple told its suppliers last month that demand for iPhones was declining.
However, we believe that these challenges are short-lived and cannot hide the fact that Apple has entered another super-growth cycle, driven by the latest iPhone models and rising demand for its wearables and other gadgets and its services. .
That may be why the majority of 41 analysts polled by Investing.com recommend Apple stock. Their consensus price target of around $175 implies upside potential of 9.66%.
Apple Consensus Estimates
Chart: Investing.com
In a recent release, however, JPMorgan analysts said AAPL stocks are not cheap relative to earnings. Still, the company's positive outlook for 2022 should keep investors happy, especially in its fiscal second quarter, when iPhone sales could reach $49.2 billion.
The note said:
“We believe that investors will continue to justify the multiple of premiums (30x) based on expectations of further earnings upgrades, leading stocks to rise on the positive result of a combination of modest budget outturns in the first quarter and a better outlook.”
Bottom Line
While Apple may disappoint some shareholders by failing to produce a blockbuster quarter due to supply chain disruptions and the proliferation of the Omicron variant, we believe there are post-profit weakness is a buying opportunity for long-term investors, given the massive pent-up demand for its products and services.
