Global tech powerhouse Apple (AAPL 0.64%) will report fiscal 2022 first-quarter earnings on Jan. 27. The company has been one of the prime beneficiaries of the coronavirus pandemic, as folks are spending more time than usual at home.
Sales and profits have surged, but now Apple is grappling with a newer challenge of the pandemic -- constrained supply chains.
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Apple is having difficulty keeping up with demand
In its fiscal fourth quarter, ended Sep. 25, Apple reported revenue of $83.4 billion. That was up by 28.9% from the $64.7 in sales of last year's same quarter. But that does not tell the whole story of how strong customer demand for Apple's products and services was in Q4. Management noted that it could have sold $6 billion more in products had it not been for supply shortages. As strong as sales were for Apple in Q4, they could have been 7.2% higher.
The constraints were felt across Apple's spectrum of products. It wasn't the case that one popular new product was sold out, and everything else was abundantly available. That's been the case for Apple since the pandemic onset -- customers are buying all its products. In its most recent quarter and fiscal year, sales grew in all four product categories (iPhone, Mac, iPad, wearables).
Apple's fiscal 2022 first quarter will consist of its most lucrative holiday selling season. Unfortunately, Apple is not expected to have solved the supply shortages in time. CFO Luca Maestri discussed the hit from supply constraints in the conference call following Apple's Q4 earnings release: "As we mentioned earlier, during the September quarter, supply constraints impacted our revenue by around $6 billion. We estimate the impact from supply constraints will be larger during the December quarter. Despite this challenge, we are seeing high demand for our products and expect to achieve very solid year-over-year revenue growth and to set a new revenue record during the December quarter."
What this could mean for Apple investors
Analysts on Wall Street expect Apple to report revenue of $118 billion in Q1 and earnings per share (EPS) of $1.89. If Apple hits the EPS projection, it would be 12.5% higher than in the same quarter last year.
The estimates for year-over-year growth are the lowest for Apple in the previous four quarters. Investors are already anticipating the hit from supply chain shortages and have lowered the bar for Q1. Therefore, management's commentary on supply chain effects for the next few quarters is more likely to move Apple's stock.
If management says something similar to the tune of what CFO Luca Maestri noted above -- the problem is worsening -- Apple's stock could move lower in the near term. Regardless, Apple is an excellent company that sustains customer demand through innovation. Short-term troubles like supply chain constraints caused by the pandemic are no reason to sell Apple stock.
