Narrow-moat Apple (AAPL) reported fiscal fourth-quarter results that came in below FactSet consensus estimates for revenue, as the firm faced supply chain constraints that weighed on sales by about $6 billion. However, we expect Apple to recover in the long term and still foresee solid demand for the company’s products and services as these supply issues subside. We are maintaining our $124 fair value estimate and suggest investors wait for a wider margin of safety, as we anticipate the Mac and iPad segments will begin decelerating in the coming quarters, following a stretch of robust growth due to COVID-19-related working- and learning-from-home.
Fourth-quarter revenue was up 29% year over year thanks to growth in iPhone (47%), iPad (21%), Mac (2%), services (26%), and wearables, home, and accessories (12%). Apple’s iPhone revenue grew 47% year over year to $38.9 billion, though we note this was off a lower base due to the delayed launch of the iPhone 12 in 2020. Greater China sales were up 83% year over year, which we attribute primarily to the 5G iPhone. Gross margins of 42.2% were down 110 basis points sequentially due to a less favorable product mix and higher costs. On the services front, we’re impressed that Apple now enjoys over 745 million paid subscribers (up from 700 million last quarter).
Management expects Apple to set a new revenue record for the December quarter, with growth in all segments but the iPad, though supply constraints are expected to reduce sales by more than $6 billion. Given Apple’s clout in the consumer electronics industry, we suspect its ability to deal with supply disruptions is better than smaller peers, though the revenue shortfall underscores the severeness of the global chip shortage.
We forecast more modest revenue growth for Apple in 2022, as strong demand for the iPhone 13 and services are partially offset by slowing Mac and iPad demand related to abating COVID-19 restrictions and supply constraints.
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