Daniel Ives: Apple will deliver a $1B+ beat next week

“Five million to 10 million units moving out of the December quarter into March due to supply chain issues is not a worry for us.”

From a note to Wedbush clients that landed on my desktop Wednesday:

Apple will be reporting its September quarter results next week on Thursday, October 28th after the bell. Despite the chip shortage noise, we believe Apple will deliver clear upside to Street numbers across the board as iPhone 13 demand was robust globally with China front and center.

The Street is looking for $84.8 billion and $1.23, with our belief that a likely $1 billion+ beat driven by the iPhone 13 launch will naturally be the focal point of investors.

The elephant in the room for Apple (and every other tech and auto player) heading into the conference call remains the chip shortage crunch and what impact this global logistics Rubik’s Cube will have on iPhone builds and shipments for holiday season. To this point, with Apple likely needing to cut iPhone units by 5 million to 10 million due to the chip shortage, December guidance (higher ASPs an offset) could be a bit mixed although this remains purely a timing issue that is well understood by the Street.

Taking a step back, 5 million to 10 million units moving out of the December quarter into the March quarter due to well understood supply chain issues is not a worry for us and ultimately speaks to a stronger demand trajectory than the Street had been anticipating with the supply chain constraints now needing to reduce builds given component shortages.

Apple remains a top tech name to own. The tech bull cycle will continue in our opinion its upward move into 2022 given the scarcity of growth names/ winners in this market looking ahead on the heels of the 4th Industrial Revolution playing out among enterprises/consumers.

Our favorite large cap tech name to play the 5G transformational cycle is Apple, with the 1-2 punch of its massive services business and iPhone product cycle translating into a $3 trillion market cap for Cupertino during 2022 in our opinion. Right now Apple has a supply constraint, with a high class problem of demand outstripping supply for the biggest product cycle Cupertino has experienced in roughly a decade with now two new launches (Mac Pro, AirPods 3) adding to these growth tailwinds.

Maintains Outperform rating and $185 price target.

My take: I believe this is the first time Ives has acknowledged that the chip shortage may affect Apple’s Q4 earnings.

6 Comments

  1. Jerry Doyle said:
    As has been stated many times, “iPhones are not perishable.” A consumer desiring an iPhone is not going to purchased another brand phone because the consumer may need to wait a week or two longer to get the iPhone 13. As Dan denotes, those unit sales affected will roll-over into Q2. Demand for the 13 is outstripping current production supply.

    The accelerated transition to remote work & learning positions Apple nicely as the number one tech company to own. More consumers are discovering Apple products and services. With the new, unique and innovative M1 chip product line segment we also will see more Macs used in enterprise settings.

    Dan continues to denote a $3T market cap for Apple in 2022. He’s correct! Apple at $175 short term and $200 during 2022. 🙂

    3
    October 20, 2021
    • Robert Paul Leitao said:
      Jerry: What’s your timeline for Apple at $175? In other words, what’s “short-term”? Your comment includes a forecast Apple’s share price will reach $200 in 2022. When are expecting the share price to reach $175? A $3 trillion market cap is about $182 per share and Dan Ives forecasts 9 months to 12 months to reach that target. Dan’s price target of $185 would put the market cap just above $3 trillion.

      0
      October 20, 2021
      • Jerry Doyle said:
        @Robert Paul Leitao: My $175 TP is pushed out to the end of Q2 2022 by the earnings call late April. My $200 TP is the end of Q4 2022, or by the earnings call late October.

        Brother Robert, Apple is firing on all cylinders. This fact is fast being recognized and accepted gradually by WS analysts. Apple has a pipeline of new, innovative, unique & great products rolling out at the propitious period during the acceleration and transitioning to remote work and learning from home in the digital age. Learning from home also encompasses business enterprise involving Staff Development through holding of in-service training, workshops, seminars and even conferences. This is in addition to the reduction in work travel leading to increased business meetings to conserve cost and time away from other job related matters. This is where Gene Munster sees upwards to 10% increased growth in Macs going forward, not to omit Apple’s other hardware and accessory business continued growth. Mac is Back!

        The global economy is drowning in liquidity. The consumer is flushed (and lushed) with cash to spend. There even is more stimulus money to come, upwards to $2T. Job openings exists everywhere for individuals desiring to work and to return to work when the need calls for them to do so. Personally, I believe that we are in the “roaring twenties!” Companies with the right management, operations, administration, leadership and offering consumers needed products & services of premium value along with the knowledge of how to leverage it all will experience outstanding growth in the coming months & years. Think Apple!

        Laissez le bon temps rouler! Geaux Apple!

        0
        October 20, 2021
  2. Robert Paul Leitao said:
    Shipments delayed are not shipments denied.

    4
    October 20, 2021
  3. Robert Paul Leitao said:
    I’m following a few of Apple’s major component suppliers and supply constraints on components have been mentioned in forward forecasts and in conference call conversations with analysts. While current supply constraints are real, there should be no surprises. Demand fulfillment in many cases will extend into the March quarter. This should be no cause for concern. It just moves revenue recognition into a different fiscal quarter in the same fiscal year.

    1
    October 20, 2021
    • Gregg Thurman said:
      I’m following a few of Apple’s major component suppliers and supply constraints on components have been mentioned in forward forecasts and in conference call conversations with analysts.

      I’m not so sure there is that much in supply constraints in the HANDSET/ COMPUTER industry. Stories about chip supply shortages first surfaced in the auto industry. Where we have seen genuine impact as assembly plants have been shut down for lack of chips. The thing is, the auto industry uses different processors than those used in handsets and computers.

      This brings me to earnings conference calls. Dumbing down expectations then surpassing those lowered expectations makes for good management, especially if lower expectations are the result of factors outside of the Company’s control, which just happens to be a good deflection from declining demand. PC shipments have been in decline since before COVID 19. There has been no break through processor improvements from INTC and no compelling feature break through in Windows (made possible by processor improvements) for some time, leading to fewer and fewer upgrades of older machines. Then you have Apple’s Mac family growing unit sales exacerbating the decline in PC sales.

      As evidence of the above let’s take a look at Mac shipment growth last year, and demand for M1X MacBook Pro Max this year. The demand for feature improvement (made possible by processor improvements) is clearly visible. What happens to Mac shipments when OS and feature capabilities, requiring the power of M1X (and beyond) are announced?

      Apple develops capabilities/products we don’t know we want, until we see them. Chip shortage? I don’t think so, at the very least not for Apple. Camera component constraints? Maybe, but that will be short lived, ending before FQ2/2022 is completed.

      1
      October 20, 2021

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