Excerpts from the notes I’ve seen. More as they come in.
Kyle McNealy, Jefferies: “Demand is Very Robust” – Solid Results Considering Supply. Apple reported solid Sep. Q results and Dec. Q guidance. We see the in-line print and implied guide as a good outcome in the face of a $6bn revenue headwind from Sep. supply constraints that are set to get bigger in the Dec. Q. Importantly, management sees demand as “very robust” which is contributing to the expanding gap between supply and demand. Apple has greater ability than most other hardware companies to get the components it needs given its size, market power, and close relationship with suppliers, enabling it to produce growth even during industry-wide shortages. Furthermore, we think there’s opportunity for Apple to elongate the cycle and make more sales in future quarters that are typically seasonally weaker (those with more manufacturing availability). While there will be a small subset of sales with consumers shopping for holiday gifts which may be lost if product isn’t available, most customers upgrading or buying a new Mac/iPad/iPhone view these purchases as more critical and are inclined to wait for availability and eventually make the purchase. Buy. $175.
Chris Caso, Raymond James: Observations After Speaking with Management. On the call, management noted their expectation for “solid” Y/Y growth in Dec. We had initially interpreted that to be up about 5% Y/Y, but on our callback AAPL’s CFO said our assumption was too conservative. They felt that ~10% Y/Y growth was more consistent with their definition of “solid” (we put our Dec. qtr revenue estimate at up 9% Y/Y). We think that’s significant, because it means Dec consensus numbers should come up, not down, and that wasn’t clear from the earnings call. In addition, despite Dec. numbers going up, they still expect to be constrained on demand at year-end, suggesting that March revenue should also be better than seasonal. Outperform. $185.
Katy Huberty, Morgan Stanley: An In-Line Quarter Under the Hood. While supply constraints will dominate headlines post Apple’s Sept Q earnings, what we believe really matters is that 1) Services growth surprised positively and remains 20%+ Y/Y into the Dec Q (with 70%+ gross margin), 2) guidance commentary implies December Revenue in-line with consensus despite >$6B supply shortfall, 3) demand in China is outpacing other markets, consistent with our recent AlphaWise Smartphone Survey, and 4) the combination of component pre-purchases, product backlog, and an earlier close to F1Q (Dec 25th) set up for a stronger than seasonal March quarter. We lower our FY22 Revenue and EPS by 2% to $387.7B (+6% Y/Y) and $5.76 (+3% Y/Y), respectively, to reflect some perishable holiday demand. With our FY22 revenue base falling slightly, but peer multiples remaining relatively stable, our price falls to $164, from $166. We’d be buyers of AAPL shares heading into the stronger March quarter. Overweight. To $164 from $166.
Martin Yang, Oppenheimer: Record Sales Across Categories and Geographies Despite Supply Crunch. Apple’s F4Q21 broke historical records again, with Mac and Services at all-time highs, and other categories reaching a F4Q high. Despite the record-breaking results, management noted that supply constraints impacted sales by $6B in the quarter. And F1Q22 is likely to see higher nominal amount of sales headwind from supply crunch. That said, demand remains robust across device categories. Apple’s active installed base and paid subscription count both achieved all-time highs. Gross margin remained strong during F4Q21, up over 400bps Y/Y. While supply crunch remains a headwind for the next couple of quarters, we expect Apple will accelerate its share gains (primarily in handsets and notebook) due to its superior supply chain management and scale advantage. Outperform. To $170 from $160.
Wamsi Mohan, Merrill Lynch: Cyclical impacts likely to amplify. As compares get tougher, we expect growth rates to decelerate sharply (starting in Dec qtr) and likely turn negative for March and June quarters. We expect iPhone and iPad revs to decline in F2022 and expect slower growth in Macs, Services and deceleration in wearables. In an environment with no supply constraints, Apple should have reported $89bn in Sep ($83bn reported + $6bn constrained) and $127bn in Dec ($119 guide + $8bn constrained). However, reported results will likely show a minor miss in each qtr with some of the constrained demand unlikely to materialize at a later date (holiday gifts of airpods, watch). Mgmt. noted it was too early to establish the demand for iPhone 13. Neutral. $160.
Harsh Kumar, Piper Sandler: Supply Constraints Overshadow Robust Demand. Apple had a rare revenue miss in the September quarter, as larger than expected supply headwinds impacted the company. The supply impact in the December quarter is expected to be larger than the $6 billion seen in the September quarter, but we are expecting year- over-year growth as well as new revenue records for most of Apple products. Management highlighted robust demand across its segments, which we attribute to the Apple ecosystem. In addition, the services business had a better-than-expected September quarter, with most categories seeing record revenue. Overall, Apple appears to be mitigating the supply situation to the best of its abilities, as we feel Apple has little control over legacy node capacity. However, we are moderating our numbers in the near term to reflect the constraints. Overweight. $175.
Daniel Ives, Wedbush: Supply Chain Issues Crash the iPhone 13 Party; Demand Outstripping Supply. The hot button issue for Cook & Co. (and every other tech and auto player) remains the chip shortage crunch and what impact this global logistics Rubik’s Cube will have on iPhone builds and shipments for holiday season. We estimate that overall demand has been robust globally as discussed by Cook last night on the call and Apple will be clearly running into a major iPhone 13 unit shortage for holiday season if consumer demand keeps up at this pace. Based on the current trajectory, we believe post Black Friday there will be an unprecedented (~70% lower than normal seasonality) low iPhone 13 inventory into Christmas/holiday season for consumers. We view this issue purely as a victim of the supply chain for Apple and NOT a demand issue for iPhones which remains the foundation of our bullish thesis and robust Services business into FY22 with iPhone 13 leading the way. While the bears will hang their hats on this supply chain issue and a valuation that has re-rated saying the Apple bull party is over, instead we could not disagree more and view any sell off as a buying opportunity given our robust view of Cupertino’s product cycle demand story into 2022. Outperform. $185.
Gene Munster, Loup Ventures: Stripping Out The Noise Reveals Sustainable Growth Trend. Apple’s September quarter results and commentary around the December quarter played out as expected, with favorable demand being muted by tight supply. Under the headline that the supply headwind will worsen in December, pushing demand into March, is the reality that Apple’s business and outlook are stronger than ever. Revenue will grow this quarter despite what we believe is a $10B difficult comp around the timing of iPhone 13, along with an $8B supply headwind. Adjusting for these factors reveals a business that is growing in the mid-teens. From a high level, we don’t expect an air-pocket in demand next year, and see the company on-track to grow in FY22 comfortably ahead of current Street estimates of 4%.