Despite Solid March Quarter Results, Looming Supply Constraints Look Daunting for Apple; $130 FVE

Narrow-moat Apple reported fiscal second-quarter results that came in ahead of our estimates despite supply chain constraints and the ongoing chip shortage. Demand for the firm's latest iPhone 13 and MacBook Pro drove record iPhone and Mac revenue for the March quarter. We remain positive on Apple's ability to extract sales from its installed base via new products and services. However, management expects June quarter revenue to be $4 billion-$8 billion lower than usual because of supply constraints stemming from COVID-19-related disruptions, the ongoing chip shortage, softer customer demand in China, foreign exchange headwinds, and a pause in sales in Russia. Shares fell about 2% during after hours trading but remain above our unchanged fair value estimate of $130 per share. We believe the recent stretch of strong revenue growth will be difficult to maintain as COVID-19-related Mac and iPad demand subsides.