Apple Forecast: Supply Chain A Problem, But Demand Remains Strong

  • Publication of the results for the second quarter of 2022 on Thursday April 28, after market close.
  • Revenue forecast: $94.15 billion
  • Expected EPS: $1.43

Shares of iconic iPhone maker Apple (NASDAQ:) have proven far more resilient than those of other tech titans in the current market turmoil. The Cupertino, Calif. behemoth continued to improve sales of its smartphones, computers and tablets, as well as wearables, throughout the quarter, despite global supply chain headwinds, enjoying a flood of new products, including the iPhone 13, Watch Series 7, and updated Mac computers.

As a result, the company is currently the top-performing mega-capacity year-to-date in the group known as FAANG. The stock closed Tuesday at $156.80.

Still, Apple’s quarterly earnings report, to be released tomorrow after the market closes, promises to test that safe-haven status. The risks are many: the resurgence of COVID-19 and associated lockdowns in China, where the company’s main parts supplier is located, as well as skyrocketing shipping costs and labor shortages that continue to burden the global supply chain.

In March, Mark Liu, chairman of the board of directors of Taiwan Semiconductor Manufacturing (NYSE:), pointed out that the numerous blockages in China were hurting demand for PCs, TVs and smartphones. Apple supplier Foxconn (TW:) halted operations at its Shenzhen locations for a few days in March due to a government-imposed lockdown on the technology center.

Wall Street analysts now expect the world’s largest company by market capitalization to post a more than 5% increase in revenue compared to the same period last year, for a total of $94.15 billion. They also forecast that Apple’s earnings could decline slightly to $1.43 per share from a year earlier, which had been boosted by the pandemic.

In a note to clients, JPMorgan said sales of the company’s flagship iPhone could disappoint investors when it releases results this week. According to the note:

“While our previous revision was driven by a modest cut in iPhone and service revenues, the latest revision is entirely driven by preliminary smartphone data for C1Q22, which tracked below analysts’ expectations. industry, partially offset by better than expected PC shipments for C1Q22.”

Super growth cycle

We should note that the challenges cited above are short term in nature. They shouldn’t hide the fact that Apple has entered another super growth cycle, fueled by its latest iPhone models and soaring demand for its wearables and other gadgets and services.

Additionally, the company delivered better-than-expected sequential results.

Perhaps that’s why most of the 44 analysts polled by Investing.com recommend buying Apple stock.

AAPL Analyst Consensus

AAPL Analyst Consensus

Source: Investing.com

Their 12-month consensus price target of around $193.08 implies 23.1% upside potential.

JPMorgan (NYSE:), which cut its price target on Apple to $205 per share from $210, continued to maintain its overweight position despite some risks to the consensus forecast. To justify its price target, the bank said:

“We remain above consensus in our revenue and earnings guidance for the current year, driven by our continued expectation of better-than-expected revenue growth and the trajectory of margins and earnings through to robust growth in services. Our positive view on longer-term equities leads us to maintain our overweight rating.”

Conclusion: Should we buy Apple stock?

Apple could disappoint some shareholders by not delivering a bumper quarter due to some slowdown in growth from supply chain disruptions and lockdowns in China.

Nonetheless, we believe any post-earnings weakness presents a buying opportunity for long-term investors, given strong demand for Apple’s products and services.

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