Gene Munster: Apple supply pains will be 2022’s gains

“Unlike many companies, it’s a function of time before Apple wins the sale.”

From “Apple Preview: Outsized Demand Wrestles With Undersized Supply” posted Tuesday to Loup Ventures subscribers:

Apple’s September quarter results and commentary around the December quarter will likely follow a well-traveled narrative of demand outpacing supply, but with a twist. The twist is that unlike many companies, it’s a function of time before Apple wins the sale. In other words, today’s supply pains will eventually equate to 2022 sales gains. We believe investors will leave the September quarter results with a belief that the step up in demand is sustainable, driven by the accelerating digital transformation for the foreseeable future.

It’s clear that growth will slow next year, as it will for almost all big tech. For Apple, we believe FY22 revenue growth will likely end up in the mid to high single digits compared to the Street, which is looking for 4% growth. If Apple continues to modestly exceed expectations over the next year, we believe shares of AAPL will continue to appreciate. If the next year plays out inline with our expectations, we believe shares of Apple can reach $200 in the next one to two years, based on applying a 28x multiple to EPS of $7 in 2023 (the Street is around $6).

We believe that 7-9% top-line growth is sustainable for a few years until Apple launches into new product categories like AR, wearables, wellness, and automation (maybe vehicles). At that point, growth will step up again putting investors’ growth sustainability questions to rest, at least for a few more years.

My take: That step-up in growth from new product categories that Munster predicts is nowhere priced into the stock.

3 Comments

  1. Robert Paul Leitao said:
    I enjoyed reading Gene Munster’s analysis. Paraphrasing Katy Huberty, demand isn’t perishable. It really doesn’t matter when in the March quarter Apple reaches supply-demand equilibrium on recent product releases. Demand will remain strong through much of FY2022. I expect continued strong Mac demand as Apple completes the transition to its own silicon and the iPhone 14 series handsets to be released in early FY2023 will accelerate the current upgrade cycle. Meanwhile, free cash flow growth will support continued share repurchases and the annual dividend increases in the 5% to 8% range.

    3
    October 26, 2021
  2. Michael Goldfeder said:
    Gene was saying in early 2019 that Apple needed to be viewed as a consumer staple like Coca Cola and Clorox. That has most certainly come to pass. Moreover, he went further out on a limb in December, 2019 and said Apple would be at $350.00 in 2020 and at $400.00 in 2021 (Pre-Split).

    His track record is second to none and I have the utmost confidence Gene will hit his current Apple numbers just as he always has done historically.

    3
    October 26, 2021
    • David Emery said:
      Since I have $200 in the April Fools PED competition, I hope we get there sooner than later 🙂

      0
      October 27, 2021

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