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Apple Stock: 2 Key Takeaways From An Atypical Quarter

On October 28, Apple delivered an atypical revenue miss that sent its share price down. The Apple Maven lists two key takeaways from the Cupertino company’s earnings day.

Apple delivered highly atypical fiscal fourth quarter results. With supply chain challenges at the center of attention, the Cupertino company failed to top consensus expectations for both revenues and EPS. The last time that Apple missed on revenues was back in March 2017; and the last time that the company did not beat on EPS was in December 2018.

Figure 1: Apple Park, in Cupertino, CA.

Figure 1: Apple Park, in Cupertino, CA.

Such unusual quarter pushed Apple stock  (AAPL) - Get Apple Inc. Report lower in after-hours trading, dropping as much as 5% and settling at around -3.7%. The Apple Maven lists two key takeaways from Apple’s fourth quarter earnings day.

(Read more from Wall Street Memes: Live Blog: Follow Apple’s Fiscal Q4 Earnings)

1. All about the supply chain

Supply chain was the focus of attention on Apple’s fourth quarter earnings day. The company faced greater than expected supply constraints that were estimated to have hurt revenues by $6 billion. iPhone revenues grew "only" 47% vs. 57% consensus. But the services segment, unaffected by supply problems, grew nearly 26% YOY, better than expected.

The chart below shows YOY growth by segment.

Figure 2: Apple's FQ4 2021 revenue growth by major segment.

Figure 2: Apple's FQ4 2021 revenue growth by major segment.

As it turns out, Apple is not immune to the global supply chain crisis. Maybe some had become too comfortable thinking that Apple had the partnerships in place and the purchasing power to weather the issues unscathed. This is probably true to a great extent, but it does not mean that Apple will not disappoint on their product sales occasionally.

Regarding revenue guidance, the company provided directional comments suggesting that the impact of the supply constraints should be larger than $6 billion in the holiday quarter. Each segment will see revenues climb, except the iPad.

2. Otherwise, not a terrible quarter

Despite the atypical revenue miss, the quarter was not too bad for the Cupertino company. The management team talked plenty about "enthusiastic demand” for the products and services. All major segments saw YOY growth – all of them, ex-Mac, in the double digits.

Greater China was a highlight, as revenues increased 83% and reinforced the strong recovery from the 2015-2019 slump. The region seems to be coming back to life in the past few quarters and trailing twelve-month growth has been a whopping 70%. See chart below:

Figure 3: Apple's FQ4 2021 revenue growth by geo segment.

Figure 3: Apple's FQ4 2021 revenue growth by geo segment.

Looking elsewhere around the P&L, gross margin reached 42.2%. This was substantially better than the comparable quarter last year. Possible drivers include a heavier mix of higher-end devices and positive mix in services. The high margin reported can be seen as good news in an environment of tough supply chain dynamics.

Also, it is impressive that opex climbed only 15% when revenues grew 29%. This is operating leverage at play, and AAPL investors should feel good about it.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)