Company / Analytics

Analytics, 28 January 2022

Apple’s historic Q1 earnings beat expectations

Apple reported its Q1 earnings on Thursday, blowing away Wall Street’s expectations with a historic quarter on strong demand for the iPhone 13 and services.

In numbers, Apple revenue jumped some 11% in Q1 despite the ongoing microchip shortage, which resulted in a $6 billion revenue loss in Q4 2021.

CEO Tim Cook credited the record results to Apple’s line “most innovative line-up of products and services ever.” The CEO also noted that the company’s supply chain challenges were improving, sending shares up about 5% in extended trading.

The holiday quarter (quarter ending Dec. 25) is incredibly important for Apple, as it provides investors with an outlook of how the company’s products may perform throughout the rest of the year.

Analysts have maintained a positive outlook for Apple’s Q2, noting that while supply chain challenges have curtailed some growth, the chip shortage is somewhat transitory, and Apple products are still being underestimated.

Apple earnings in Numbers

It was another strong showing for Apple in its most important quarter of the year which includes holiday sales. Every one of Apple’s product lines grew year-over-year from last year, except for iPad sales, despite management warnings from October that supply issues could hurt the company’s sales.

Apple released new iPhone models in September, and this quarter was the first full quarter of iPhone 13 sales, giving investors a preview of how competitive the devices are in the market. Sales were up 9% annually to $71.63 billion, although they are growing slower than Apple’s overall business.

Apple beat analyst estimates for sales in every product category except iPads and overall revenue was up 11% annually. Here are the most important numbers from the report compared to what analysts were expecting from the company as compiled by Bloomberg.

Apple Outlook

Bloomberg reports that Apple is also expected to launch a 5G-capable version of its iPhone SE in the coming months, along with updated versions of its iPad and Mac laptops. But it will be some time before those rumoured products show up on Apple’s bottom line.

Apple again did not provide official guidance about expectations for the current quarter. Apple hasn’t provided guidance since the start of the Covid-19 pandemic, citing uncertainty.

Apple CEO Tim Cook did provide a forward-looking data point in an interview with CNBC’s Julia Boorstin. “What we expect for the March quarter is solid year-over-year revenue growth,” Cook said. “And we expect supply constraints in the March quarter to be less than they were in the December quarter.” But cook also confirmed that Apple was seeing inflationary pressure. “I think everybody’s seeing inflationary pressure,” Cook said. “There’s no two ways about that.”

Should I buy Apple stock?

The current consensus among 44 polled investment analysts is to buy stock in Apple Inc. This rating has held steady since January, when it was unchanged from a buy rating. The 38 analysts offering 12-month price forecasts for Apple Inc have a median target of 188.69, with a high estimate of 215.00 and a low estimate of 105.00. The median estimate represents a +18.55% increase from the last price of 159.16, according to CNN Business.

While the key takeaway is that Apple is priced for perfection, investors should understand that the market knows results are heading towards flat growth. The logical conclusion is for the tech giant’s stock to inevitably fall to levels more in line with greatly reduced growth rates in future periods. Some analysts believe that the COVID-19 boom of the last year ultimately ends in tears for shareholders holding on too long.

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