Apple’s stunning Q1 2022 quarter: What the analysts are saying

Excepts from the notes I’ve seen. More as they come in, new ones on top.

Chris Caso, Raymond James: Believe! For March, management guided to “solid, but decelerating” y/y growth, against strong comps in the year ago quarter due to last year’s late iPhone launch. We interpret that guidance to suggest 5-6% y/y growth, also above our estimates and well above consensus, as some easing in supply constraints allow Apple to catch up on unfulfilled demand. Looking ahead, we think constraints over the last two years have likely tended to extend the 5G upgrade cycle, and means that iPhone can still manage to grow next year. We think the growing installed base will continue to pay dividends for services growth. And we look forward to the next “one more thing” – VR – though we’re not yet confident in that product’s arrival in C22. Outperform. Target to $190 from $185. 

Katy Huberty, Morgan Stanley: Ecosystem Strength Shines Bright. Apple’s December quarter was one of the cleanest quarters in recent memory as revenue, gross margin, and EPS all beat our above consensus forecast, with Mac and Services growth particularly strong. When coupled with a stronger than anticipated March quarter guide despite difficult Y/Y comps and continued (but easing) supply constraints, tonight’s results illustrate the strength and stability of Apple’s product and services ecosystem, a clear differentiator in a more difficult market environment. In our view, Apple’s results are likely to refocus investors on the longevity and durability of Apple’s 1.1B, and growing, user base. Overweight. Target to $210 from $200. 

Abhinav Davuluri, Morningstar. Narrow-moat Apple reported stellar fiscal first-quarter results that came in substantially 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 December quarter. We remain positive about Apple’s ability to extract sales from its installed base via new products and services. While we are raising our fair value estimate to $130 per share from $124 to account for the stronger results, we think the recent stretch of double-digit revenue growth will be difficult to maintain as COVID-19-related Mac and iPad demand subsides.

Martin Yang, Oppenheimer: Share Gain Does Not Stop Here. Once again, Apple delivered stronger-than-expected Dec. Q results and Mar. Q guidance despite supply chain shortage. It set an all-time total revenue record of $123.9B (+11% Y/Y) and installed base record of 1.8B. The strength was broad- based across product categories and geographies. Our previous view was that Apple may accelerate share gain in the current environment due to its better supply chain management and improving performance/price ratio relative to competing hardware products. Notably, Apple is still gaining new customers at impressive pace, with 6 out of 10 MacBook buyers in China, 1/2 iPad, and 2/3 Watch buyers new to devices. Those new users will likely purchase more devices in the Apple ecosystem and contribute sustainable growth to Apple’s active installed base. Outperform. Target to $190 from $170. 

Daniel Ives, Wedbush: Back Against the Wall, Cupertino Comes Out with a Rocky Balboa-Like Performance. With ASPs continuing to be very positive on Pro/Pro Max and as of today roughly 250 million of 975 million iPhones worldwide not upgrading in 3.5 years, we focus on the demand front and do not view the supply chain issues as crashing the iPhone growth story in 2022 despite many yelling fire in a crowded theater in this white knuckle market. Overall, the Apple growth story is plowing straight ahead and supply chain improvements potentially on the horizon is a major bullish data point not just for Apple, but the entire tech sector to digest this morning. Outperform. $200. 

Wamsi Mohan, BofA Securities: Delivers another record quarter, demand strong across the board, PO to $215. The resilience of Apple’s financials and consistent ability to deliver strong cash flow make its investment appeal even higher in a macro environment where predictability of cash flows is becoming increasingly scarce… We do not expect Apple to achieve supply/demand balance on iPhone/iPad exiting the Mar qtr as demand remains strong and component shortages continue. Apple is benefiting from better mix as 1) customers buying higher-end products helped by financing/trade-in programs, and 2) supply constraints having a higher impact on older (lower priced) models. Buy. Target to $215 from $210. 

Gene Munster, Loup Ventures: We Shouldn’t Be Surprised by Apple’s Results. I’ve seen a lot of Apple quarters. So many that the countless impressive ones blur together. I’m trying to guard against recency bias but I still believe this one was memorable. Not just because the December quarter and March outlook were impressive on all metrics — Apple’s done that before. This time was different given it was in the face of chip shortages, COVID, ships parked outside of ports, spikes in logistic costs, store closings and hard comps. When I searched for an explanation of how they did it, I realized I shouldn’t be surprised by the performance. When you build the best consumer tech in the world, things turn out that way.

Amit Daryanani, Evercore: Just the right amount of everything. We think “March” is the difficult quarter and if AAPL can show top-line growth despite a difficult compare (+56% LY) it actually sets the bar for revenue acceleration in H2:22 driven by easing compares + multitude of new product launches that should occur. Net/Net: While we suspect some debate around how much of Mar-qtr is driven by channel dynamics, we think revenue compares get easier in June and beyond. At the same time we should see various new launches – iPhone SE3 (later May), iPad/mac refresh (June), iPhone 14 (September), and new offerings like AR/VR (Fall 2022). Outperform. $210.

Harsh Kumar, Piper Sandler: Apple Doesn’t Disappoint – Record Metrics Across the Board. Apple reported a strong December quarter, with record results across most categories. The company was able to deliver the strong results and March quarter guidance despite the global supply constraints. Going forward, we expect momentum to continue on a Y/Y basis, with Apple expected to set a record March quarter due to 1) strong 5G iPhone penetration and 2) supply shortages improving compared to the December quarter. The company currently has a stunning 1.8B devices installed globally, which is helping the services business reach new heights and driving profitability higher. Apple’s paid subscriber count is now 785 million, up 165 million from last year. We believe 5G smartphone penetration will continue to drive the install base higher over the next couple years. Overweight. $200. 

Kyle McNealy, Jefferies: China Making a Big Comeback China revenue was strong at $25.8bn (+21% Y/Y). Strong results also came in for all geographies except Japan which was weaker. We’ve been hearing in our discussions with industry contacts that Apple is now the leading smartphone vendor in China. It’s not natural for Apple to be the biggest share gainer from Huawei as it takes an operating system switch from Android to iOS. However, we think other OEMs in China (Vivo, Oppo, Xiaomi, and Honor) have such little experience and success selling premium phones it leaves a door open for Apple. Buy. $175. 

Daniel Ives, Wedbush: Monster iPhone Number Despite Chip Shortage. Apple just delivered a robust December quarter that will be the focus of the tech universe as the Street had major supply chain/growth fears heading into this print… While the conference call will be key and high level demand commentary for the March quarter, Cook is calling out some supply chain improvement for the March quarter which are “calming words heard around the tech world” and much needed good news in what has been a market storm. Outperform. $200.

Rod Hall, Goldman Sachs. Neutral. Target to $161 from $142. 

Pierre Ferragu, New Street. Upgraded to Neutral from Sell. Target to $165 from $90. 

David Vogt, UBS: Buy. Target to $185 from $175.

Tim Long, Barclays: Equal weight. Target to $169 from $145.

Brian White, Monness. Buy. Target to $199 from $184.

Tom Forte, Davidson. Buy. Target to $185 from $170. 

Michael Walkley, Cannacord: Buy. Target to $200 from $185. 

Laura Martin. Needham: Buy. $170. 

Krish Sankar, Cowen: Outperform. Target to $200 from $180. 

William Power, Baird: Outperform. Target to $190 from $185. 

Sidney Ho, Deutsche Bank: Buy. Target to $220 from $200. 

34 Comments

  1. Mark Visnic said:
    “When you build the best consumer tech in the world, things turn out that way. [an impressive quarter on all metrics]”. Gene Munster

    7
    January 28, 2022
  2. Dan Scropos said:
    Where’s Rod Hall’s commentary? Not that anyone cares, of course, but I’m interested to see how he spins this.

    How many quarters in a row can poor analysts use Work From Home, pulled ahead, and other nonsensical fallacies? For every unit that actually *is* a result of the above, I would argue that there is 1+ units supply constrained. Net/Net, Apple’s results are the result of nothing more than innovation, problem solving, brand loyalty, life enrichment, and customer satisfaction. Period.

    10
    January 28, 2022
  3. Daniel Epstein said:
    Well apparently this was the best quarter ever by any company ever (according to an article in Inc) so superlatives and respect should accrue to the company. Tough tape seems to be limiting general response. Price target hikes seem tepid so far. I think this is due to macro market concerns limiting exuberance.

    6
    January 28, 2022
  4. Excellent Apple results usually bring Sweeney, the EU and Senator Klobuchar out of the shadows. Sweeney’s team will get an injunction against Apple iPhone in Lesotho, EU will probably announce a new tax on digital watches and the good Senator will insist Apple eschew all profits for the greater good.

    9
    January 28, 2022
    • David Emery said:
      Because in the minds of some (many), large profits are “obscene.”

      1
      January 28, 2022
      • Alan Birnbaum said:
        Ahhh, but remember back a few years ago when Exxon got a “windfall tax” for making too much money ……

        0
        January 28, 2022
  5. David Emery said:
    “Tim Long, Barclays: Equal weight. Target to $169 from $145.”
    I think that’s what you call a “misnomer.” 🙂

    4
    January 28, 2022
  6. Fred Stein said:
    Great to see PTs going up.

    No mention of Apple silicon 5G in 2022, hopefully on TSMC 3n. Like the M-series, this long-in-the-making but predictable advance becomes a game changer.

    Look at suppliers that Apple voted off the island, Samsung, Intel, and soon Qualcomm.

    7
    January 28, 2022
  7. Fred Stein said:
    Love Katy’s point about PC share gains. And Kyle point about taking Android share in China – switchers. Both are powerful sustainable indicators.

    4
    January 28, 2022
    • Aaron Belich said:
      Not necessarily. Do recall, there’s the major apps that the Chinese populace uses that are platform agnostic.

      I’d love to see charts showing the switching rates in China over the past decade.

      1
      January 28, 2022
      • Fred Stein said:
        Yes, switching is easier in China for the reason you cite.

        The main point is that people are switching. Since iPhone IB continually grows, we can surmise that more switch to Apple, than from. That’s the long-term growth indicator.

        4
        January 28, 2022
      • Bart Yee said:
        While true about What’s App and the like being platform agnostic, the growth of Apple iPhone and Mac sales show more Chinese consumers are choosing Apple products to be their communications and media consumption device regardless of which app they use to do so. IMO, for some, they might just find that iMessage blue bubbles confer a certain exclusivity that gives a prestige boost, something that status conscious Asians may enjoy. Plus being exposed to the Apple App Store and ecosystem provides more Services growth for Apple China results.

        The lure and attraction of Apple Designed in California and even foreign made (assembled in China) can tick off a lot of boxes for a Chinese non-price sensitive consumer with choice. A new more affordable 5G iPhone SE3 2022 (a mouthful no matter what language so just new iPhone SE) could prove very effective in increasing Apple installed base in China.

        1
        January 28, 2022
  8. Bruce Oran said:
    @ Dan Scropos “where’s Rod Hall”, though I have not seen it I predict, “ IPad fails to impress. One of their most loved and useful products shows overall corporate weakness ! As I suspected Apple is doomed! Where are the bulls now?” Why is CNBC not returning my calls?

    4
    January 28, 2022
  9. Jerry Doyle said:
    PED, we must see Rod Hall’s commentary. I want my morning laugh before I start my day. As brother Dan S says, “I’m interested to see how he spins this.” 🙂

    4
    January 28, 2022
  10. Chris De Armond said:
    PED, I especially like reading the reasonings of those way underwater analysts and the views into their thinking so I can compare theirs with mine. Hearing from contrarians can be useful. Case in point: Abhinav Davuluri, Morningstar, your lead off above, to me shows his fallacy in the initial adjective “narrow-moat”. We here all generally believe Apple’s moat to be very wiiiiide and deep and getting wider and deeper each year.

    The access to so many analyst views and forecasts on a recurring and updated basis including a test of how each performs (per your quarterly contests) can not be easily, or at all, found anywhere else. This alone makes the subscription a great value.

    11
    January 28, 2022
  11. Mark Visnic said:
    Sacko’s and Hall’s silence is deafening. They are having a hard time finding something negative to justify their perpetually sour representations,

    2
    January 28, 2022
    • Jerry Doyle said:
      @Mark Visnic: John Forte on CNBC’s “Tech Check” just confronted Rod Hall in an interview relative to his past Apple & current Apple stock rating. Rod Hall searched for words and touted how he does not have a “sell” rating on the stock, but a “neutral” rating. Forte challenged Hall on his neutral rating.

      7
      January 28, 2022
  12. Fred Stein said:
    Yes Chris. One wonders; “How does he see narrow moat?” No data nor anecdotes support this. No one leaves the platform. No new technology, nor business model challenges Apple.

    3
    January 28, 2022
  13. Thomas Larkin said:
    And if you haven’t yet, “A Bipartisan Bad Idea” by Michael Bloomberg (you know where to find it) is well worth the read!

    2
    January 28, 2022
  14. bas flik said:
    iPhone business is under estimated by the street.
    All hardware of apple is high margin.
    they compare apple hardware with marginless pc business of HP dell etc.
    its about margin. preferable from software but if it comes out of hardware who cares?
    Foldables of Samsung are a failure, though nice phones. really difficult to sell.
    next week cashback promotion of 250 euro for the Fold3. This will not be enough to make it sellable.
    Samsung S22 launch will be 9 feb 2022.
    Then we will know more about the strenght or weakness of Samsung.
    My prediction is that samsung lost its position as Apple competitor
    and will be eaten by chinese low cost hyenas.
    this gives Apple room for growth.
    Samsung once flourished with big screens when Apple sticked to smaller screens.
    This was their only trick.

    6
    January 28, 2022
  15. Robert Stack said:
    Did Katy make the error of stating “Apple’s 1.1B, and growing, user base”? Or did PED simply hit the wrong key? 🙂

    Minor point, admittedly!

    0
    January 28, 2022
    • “Did Katy make the error of stating “Apple’s 1.1B, and growing, user base”? Or did PED simply hit the wrong key?”

      PED simply cuts and pastes.

      4
      January 28, 2022
      • Robert Stack said:
        Well she was probably up late last night and got a little tired as the evening wore on…

        0
        January 28, 2022
  16. Robert Stack said:
    Re: “Pierre Ferragu, New Street. Upgraded to Neutral from Sell. Target to $165 from $90.”

    This guy – did he apprentice with Rod Hall? More seriously, based on the results of a single quarter he nearly doubles his PT for the company? One wonders how he justifies that!

    5
    January 28, 2022
    • David Lum said:
      I believe Ferragu has been covering Apple a lot longer than Rod Hall. I was shocked to not see a sell rating from him. I remember years ago reading some of his analyses in which he stated that the iPhone couldn’t maintain their profit levels, and ultimately be commoditized by Android competitors.

      4
      January 28, 2022
  17. Thomas Larkin said:
    Consumers are choosing safety, quality, and ease of use over cheaper, shorter lived phones sustained by data mining and selling.

    2
    January 28, 2022
  18. Chris De Armond said:
    If not a typo, Ms. Huberty says “user base” 1.1B, Apple says “installed base” 1.8B. I believe installed may refer to active devices while users are Apple accounts (multiple items: phones + pads + computers). If so, how does she know?

    Additionally, how does either account for watches? One account, but you can’t have a functional watch without a connected iPhone. So does Apple’s installed base count watches as distinct items (accretive to) the “installed base?”

    1
    January 28, 2022
  19. Bart Yee said:
    Rod Hall, Goldman Sachs. Neutral. Target to $161 from $142.

    Pierre Ferragu, New Street. Upgraded to Neutral from Sell. Target to $165 from $90.

    Despite global warming Hell hath frozen over. 🙀

    2
    January 28, 2022
  20. David Emery said:
    The vaudeville act of Hall & Ferragu are still honking their horns for Apple to drop from today’s close of $170.33…

    2
    January 28, 2022
  21. Ken Cheng said:
    All I know is that in the last 12 months, Apple’s Net Income was over $100B!!! Okay, 3 months later than I had expected, but … supply chain!

    0
    January 28, 2022

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