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Wall Street Still Bullish on Apple, Sees Robust Demand

Shares of Apple slipped after a rare miss on revenue expectations, but analysts urged investors to buy the dip in the tech giant.

Shares of Apple  (AAPL) - Get Apple Inc. Report were falling a day after the iPhone maker missed fiscal fourth quarter revenue forecasts  owing to the global chip crisis, which it said would linger into the holiday period.

Some Wall Street analysts urged investors to buy the dip in the tech giant while others maintained their price target and ratings on the company as consumer demand for iPhone continues to rise.

"We estimate that overall demand has been robust globally as discussed by [CEO Tim] 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," said Wedbush analyst Dan Ives in a note to investors.

Wedbush said iPhone 13 inventory could dip 70% lower than normal after Black Friday.

"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," added Ives.

Wedbush reiterated its outperform rating and a price target of $185 a share on the stock.

Shares of the Cupertino, Calif., company at last check slipped 3.52% to $147.19.

Apple reported $83.4 billion of revenue in its fiscal fourth quarter, up 29% from a year ago but below expectations of $84.3 billion. Cook said on the analyst call that chip shortages had cost the company $6 billion in sales in the just-completed quarter.

Apple declined to offer specific guidance for the holiday season but Chief Financial Officer Luca Maestri said “demand is very, very strong” and anticipated record revenues. 

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Apple was the world's largest buyer of semiconductors in 2020, according to Gartner, accounting for 12% of the total market, or $54.2 billion, up 25% from 2019's $43.4 billion, investment firm Oppenheimer cited in a research note.

Oppenheimer analyst Martin Yang raised the firm's price target on Apple to $170 from $165 and maintained an outperform rating on the shares.

"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, said Yang.

"We see chip supply constraints pushing demand forward for flagship RF [radio frequency] suppliers to Qorvo  (QRVO) - Get Qorvo, Inc. Report, Skyworks  (SWKS) - Get Skyworks Solutions, Inc. Report, Broadcom  (AVGO) - Get Broadcom Inc. Report and audio supplier Cirrus Logic  (CRUS) - Get Cirrus Logic, Inc. Report," Yang wrote.

Oppenheimer's Yang also said that Apple will show stronger resistance to competition with its expanding hardware and software ecosystem. "We expect Apple's significant leadership in accessories such as Apple Watch and AirPods to provide incremental sales growth," he added.

Credit Suisse analyst Dan Knuaff said Apple's strength in services and iPad/Mac were bright spots and highlight the value of Apple’s broader ecosystem. 

Apple's Mac division added 1.6% in revenue to $9.18 billion, while iPad sales jumped 21.4% to $8.3 billion for the fourth quarter. Revenues at Wearables, a category that includes headphones and smart watches, increased 11.5% to $8.8 billion. 

"While a clear read-thru to sustainability of iPhone momentum in year two of the 5G cycle will be difficult until supply disruptions abate," Knauff told investors.

Credit Suisse has a price target of $150 and a neutral rating for Apple.