As supply constraints hit nearly every market, what good is the purchasing power of a $ 2.5 trillion electronics giant?
Investors are about to find out like Apple Inc. AAPL,
getting ready for his Thursday afternoon results report. The company warned three months ago that it expected larger impacts from supply chain issues in the September quarter than in the June quarter, but the global crisis appears to be s ‘be stepped up since the last time Apple faced investors – a recent Bloomberg News report indicated that Apple was planning to cut its iPhone 13 production targets for the year due to component shortages.
Perhaps as a sign of its confidence, Apple has launched numerous device launches over the past two months. The company hosted its traditional iPhone launch event in September, which also included Apple Watch and iPad introductions, and then unveiled new MacBook Pros and AirPods a month later.
Potential supply constraints threaten to scramble an already uneventful iPhone launch and come at a crucial time for Apple as the holiday season approaches. Even in less dramatic times for the global consumer electronics industry, Apple sometimes struggled to meet the holiday quarter’s demand for popular gift items like its AirPods.
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Still, one analyst saw positive potential for Apple amid the global disruption. If the company is indeed facing component shortages that will impact its ability to deliver devices to consumers, rivals could feel the crisis even more deeply, according to Katy Huberty of Morgan Stanley. Apple gets “preferential treatment” from its suppliers in difficult situations, she argued, potentially positioning it to gain market share during this period.
DA Davidson analyst Tom Forte wrote that he was “encouraged” to see relatively quick delivery times for products announced by Apple in October. He will monitor the revenue and profit impacts of supply issues on Apple’s earnings call.
HP Inc. HPQ,
one of those rivals to Apple, recently painted a mixed picture as executives called for continued strong demand for the company’s personal computers, but noted they expected shortages persist next year. The company faces a growing backlog.
It’s been over a year since Apple last published a traditional financial outlook with its earnings report, and the company is unlikely to revert to its old ways of guiding amid uncertainty. as to the dynamics of the offer. Nonetheless, investors will be looking for signals on how the latest iPhone lineup performs in its first weeks of availability, as well as broader indications of Apple’s ability to manage supply chain disruptions in the markets. months to come.
What to watch
Earnings: Analysts tracked by FactSet expect Apple to have earned $ 1.24 per share in its fiscal fourth quarter, down from 73 cents per share the year before. According to Estimize, which uses projections from hedge funds, academics and others, the average earnings estimate is $ 1.33 per share.
Returned: Consensus FactSet forecasts revenue of $ 84.99 billion for the September quarter, up from $ 64.7 billion a year earlier. The average projection on Estimize is $ 87.09 billion.
Analysts tracked by FactSet are looking for $ 41.16 billion in iPhone sales; $ 7.25 billion in iPad sales; $ 9.15 billion in Mac sales; $ 9.4 billion in clothing, home and accessories sales; and $ 17.70 billion in service revenues.
Movement of stock: Apple shares have fallen the day after each of the company’s last four earnings reports. Shares are up 12.2% so far this year, the Dow Jones Industrial Average DJIA,
which counts Apple as a component, rose 16.6%.
Analysts remain generally optimistic about Apple’s outlook: Of the 43 FactSet tracked that cover Apple stocks, 32 have buy ratings, nine have hold ratings, and two have sell ratings. The stated average price target is $ 167.32, or 12.5% above recent levels.
What analysts say
SNAP by Snap Inc.,
pain could be Apple’s gain.
The smartphone giant has positioned itself as a champion of privacy, hurting social media companies on Snap that have relied on the ability to track user activity and target ads accordingly.
Users have gradually upgraded their device operating systems to newer versions of Apple’s iOS that allow third-party tracking to be disabled, and Snap expects a significant impact from the changes. Its shares suffered a record drop after its September quarter report, suggesting to at least one analyst that Apple could be poised to profit by calling on advertisers itself.
Read more: Snap shares hit record low after blaming Apple for weak forecast
While Apple has restricted the ability for third parties to track user activity for marketing purposes, the company is also trying to grow its own advertising business, and Evercore ISI analyst Amit Daryanani wrote that the disruptions felt by Snap could help “new market players like Apple at the expense of more established competitors,” although Apple’s measurement tools may not be ideal for some in the advertising market.
“Apple’s recent actions may have been focused on privacy, but it also creates a very supportive environment as they seek to build an advertising business that we believe could potentially generate $ 20 billion in annual revenue. “, he wrote.
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Advertising is part of Apple’s service business, with the App Store increasingly a matter of contention. Apple takes up to 30% of in-app purchases made through its payment system, and some top developers have requested an alternative payment option. Following a lawsuit by Epic Games, a federal judge recently ruled that Apple should allow app developers to connect to other payment options, but the company is appealing the ruling.
App Store fees are a lucrative part of Apple’s business, and the company may face questions in its earnings call about its growing antitrust pressures as well as the financial impacts of possible payment changes on. the App Store.
“The injunction could equal 1% revenue and 4% impact on EPS for Apple in 2023 and beyond,” Jefferies analyst Kyle McNealy wrote last month. “Any impact will take time and will not be visible before June 22, Q at the earliest,” he continued, describing the judge’s decision as “largely winning” for Apple since the judge refused to qualify the company. illegal monopolist.