Apple Stock: 3 Key Takeaways From Fiscal Q3 2021 Earnings

On July 27, Apple reported another impressive set of results, but the stock dipped in after-hours trading. The Apple Maven highlights three key takeaways from fiscal third quarter.
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In fiscal third quarter, Apple delivered yet another killer all-around beat. But to the frustration of some, the stock failed to find its way up. Shares dipped in after-hours trading: nearly -4% after partial guidance was offered, eventually stabilizing at -2%.

Figure 1: AAPL on July 27 trading after hours.

Figure 1: AAPL on July 27 trading after hours.

(Read more from Apple Maven: Apple Fiscal Q3 2021 Earnings: Live Blog For Investors)

Below, the Apple Maven lists the 3 key takeaways from earnings day:

#1. Better than guidance, better than consensus

Wall Street was, once again, expecting a blowout quarter - and Apple did not disappoint. The company reported adjusted EPS of $1.30 vs. $1.01 estimated.

On revenues, $81.4 billion topped $73.3 billion estimated, up 36% year-over-year vs. 23% expected. This was the second largest year-over-year increase in sales of the past 20 quarters, at least.

The iPhone was, indeed, a highlight in the quarter: $39.6 billion vs. consensus of $34.6 billion. About two-thirds of the revenue beat vs. consensus came from this segment.

Wearables had its best quarter of growth since the start of the pandemic: 36%. This was not a surprise, as people start to leave their homes once again, wearing their Watches and AirPods.

All geographic segments were up at least 28%, with Greater China having shot through the roof: 58%. It was, indeed, an outstanding quarter for Apple.

Figure 2: FQ3 2021 Revenue growth by major/geo segment.

Figure 2: FQ3 2021 Revenue growth by major/geo segment.

#2. Not all about pandemic tailwinds

If there was any concern over demand for Apple's products of services coming out of the thick of the pandemic, it was put to rest.

When questioned about the "pandemic benefit", CFO Luca Maestri said that he does not have full visibility on the net impact. Parts of the business benefited, others were hurt (e.g. store closures, certain services like Apple Care). 

But the more important point is that Apple has proved that it can execute during and after the COVID-19 crisis. Bears and skeptics that thought the Cupertino company would fumble in 2021 have been proven wrong so far.

This is not to say, of course, that the pandemic does not matter. For next quarter guidance, Apple provided directional revenue outlook: if COVID-19 impact does not worsen, double-digit growth in sales should be expected, but lower than the 36% delivered in the June quarter - due, in part, to more disruptive supply constraints impacting the iPhone and iPad.

#3. Brace for more supply chain issues

When Tim Cook was questioned about supply constraints spilling into next quarter, the CEO said that he is paying more for freight than he would like. At the same time, he does not want to predict how long the issues may last.

Bears might hang on to the fact that September will see more supply chain challenges. Could this be a problem for the iPhone 13's launch? Hard to tell, but here's what we know: Apple has been executing very well amid this still challenging environment.

(Read more from Apple Maven: Chat With Wedbush’s Dan Ives: The iPhone Is Underestimated)

(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)