Apple will report its first fiscal quarter of 2022 (fourth calendar quarter) results after market close on Thursday, Jan. 27.
The first quarter earnings call will give us insight into sales of the iPhone 13 models, AirPods 3, M1 Pro and Max MacBooks, and other devices during the holiday quarter that ended in December. Apple CEO Tim Cook last quarter said that supply constraints caused by chip shortages had cost Apple $6 billion, and the chip shortages and supply issues are also expected to impact Apple's first quarter earnings results.
Ahead of the earnings report, here's a close look at some of the areas investors may want to check on.
Revenue growth
Analysts have big expectations for Apple's top line. On average, they expect revenue of $118 billion for the quarter. Though this only represents about 6% year-over-year growth, it's a bullish forecast when you put it into context. First, consider the tough comparison Apple is up against. Revenue in the year-ago period rose 29% year over year. Second, supply constraints and logistical challenges in the company's most recently reported quarter were so great that management opted to refrain from providing specific revenue guidance for fiscal Q1, coinciding with the fourth calendar quarter. In addition, Apple management said it expected the pain from supply challenges to persist in fiscal Q1.
"We estimate the impact from supply constraints will be larger during the December quarter," management said in the company's fiscal fourth-quarter earnings call.
But if Apple does a good job of mitigating supply chain challenges, the December quarter could be quite impressive; management said Apple was seeing "high demand" for its products. In addition, management said it expects "revenue for each product category to grow on a year-over-year basis, except for iPad, which we expect to decline year over year due to supply constraints."
Earnings per share
Analysts expect Apple's earnings per share to grow even faster than revenue. On average, analysts are modeling for earnings per share of $1.88, representing year-over-year growth of 12%.
Apple's earnings per share typically grow faster than its revenue because of the company's aggressive share repurchases. By reducing total share count over time, Apple's net income is spread across a shrinking number of shares, contributing to earnings-per-share growth.
Revenue guidance
Another important metric investors will probably look to is management's guidance for its fiscal second-quarter revenue. Currently, analysts seem to have a very conservative view for the quarter, with the consensus estimate calling for revenue of $90.4 billion. That's only slightly above the $89.6 billion of revenue the company reported in the second quarter of fiscal 2021.
Just as was the case for fiscal Q1, the light revenue forecast stems from Apple's tough year-ago comparisons and an uncertain operating environment. But it's possible analysts are being too conservative.
Overall, supply chain and logistical challenges mean that Apple's upcoming earnings report is a bit of a wildcard; Apple's business performance could be anywhere from poor to outstanding relative to analyst estimates. But in order for the company to keep investors excited, Apple will likely have to report revenue, earnings per share, and revenue guidance ahead of analysts' estimates.
Apple Analysts Boost Targets Ahead of Earnings
Analysts continue to crank out bullish notes about Apple‘s outlook ahead of the tech giant’s earnings report.
Apple had a big run in late 2021, pushing the stock close to the $3 trillion market capitalization level, a milestone no company has previously reached. Bulls think results for the fiscal first quarter ended Dec. 31 could spur the stock to finally eclipse that hurdle.
Loop Capital Markets analyst Ananda Baruah repeated his Buy rating on Apple shares, lifting his price target to $210, from $165. He believes the company will surpass Street expectations both on iPhone units sold and for average selling prices in fiscal 2022. Apple could post 10% to 15% growth in both iPhone and overall revenue this year, he writes, which would be well ahead of the Street consensus forecast for 4.4% growth.
Baruah estimates December-quarter iPhone units were in the 84-to-85-million-unit range, above the Street consensus at 81 million. Driven by strong iPhone sales, he’s modeling December-quarter revenue of $122 billion and profits of $1.95 a share, above consensus at $118 billion and $1.88 a share. He also thinks the Street consensus on calendar 2022 iPhone production is too low—he’s expecting 243 million to 245 million, with the Street at 240 million.
Piper Sandler analyst Harsh Kumar likewise repeated his Overweight rating on Apple shares, while lifting his price target to $200 from $175. “We believe Apple has a favorable set-up for 2022,” he writes in a research note. “We believe iPhone momentum will continue due to 5G adoption, particularly in the United States and China. In addition, we see growth in services and wearables offsetting some of our growth concerns in Mac and iPads.”
Kumar adds that he sees healthcare and autos as “the next major growth markets for the company.” The move into those markets, he says, should set up the company to expand its valuation to $4 trillion and beyond.
“We expect the upcoming earnings print for Dec-Q (F1Q) to feature some of the headwinds from the slow supply chain ramp in relation to new products, which will limit the magnitude of upside; although, we expect a modest beat nevertheless, led by better iPhone shipments,” JPMorgan’s Samik Chatterjee said in a note.
Production disruptions due to Covid outbreaks have impacted companies across industries in the past year, but JPMorgan sees supply recovering for Apple in the fiscal second quarter.
Improved supply and persistently strong demand should lead to above-seasonal iPhone revenue, JPMorgan said. The firm expects Apple to ship 61 million iPhones in the fiscal second quarter, translating to $49.2 billion of sales.
While JPMorgan says Apple shares are not cheap relative earnings, the firm believes the company’s positive outlook for the year should keep investors happy.