Apple Q4 Earnings Preview

Apple is forecast to have had a strong performance in the fourth quarter, but guidance about iPhone sales for the current quarter might disappoint.

----------------

Susceptible to chip shortage


Apple hasn't been immune from the global chip shortage challenge, and that's expected to keep impacting its deliveries.

At its most recent trading update, ASML (the Dutch semiconductor supplier) said that demand for microchips was 40% above supply, suggesting the problem would persist well into next year.

Most recently, it was reported that Apple could delay the release of its wearables products to 2023 due to supply concerns. At the last earnings presentation, CEO Tim Cook essentially said that the limiting factor on achieving more sales was simply not having enough production to keep up with demand. Longer-term, that's positive for the future evolution of the company but means short-term headaches and lower sales than might have been, while supply chain concerns persist.

Supply chain issues could be a double whammy for Apple investors on top of the markets rotating from high growth (interest-rate sensitive) tech stocks to value stocks in sectors like industrials.

The key components

The iPhone remains the largest source of revenue for Apple. Apple’s fiscal fourth-quarter 2021 (July-September) failed to meet delivery expectations. Apple has forecasted that there will be "very solid revenue growth" in its fiscal first-quarter 2022 (October-December). Typically, Apple doesn't provide strict guidance for the coming quarter but rather an indication of "better" or "worse" sales.

The market might also be interested in Apple's estimate of just how much the supply chain problem affects the company. Last quarter, Apple said they lost $6B due to supply chains and expected the situation to be worse in Q4. Its earnings would have been 7.2% higher if constraints weren't an issue. If the company provides a more positive outlook about sales conditions and supply chain problems for the second quarter, that could offer the stock a boost.

What's next for AAPL?

Apple's share price has lost a big chunk of its value in the most recent deleveraging event and it remains subject to further downside risks. The $155 support and former resistance has rejected bears for now but the short term trend remains to the downside.

A bounce towards the $168 broken Head and Shoulders pattern neckline will be more likely if Apple delivers strong Q4 earnings. Strong buying volumes support the current bullish reversal. However, with market dynamics shifting by the hour, maintaining an upward bias might become harder down the line. If the decline is to continue – perhaps after missed earnings expectations - $150 is next major support, with the 200 DMA sitting just underneath.

Source: Spreadex Trading Platform

Takeaways

Despite growing demand, the Apple share price will be impacted by supply shortages since it affects the full spectrum of the company's products. Investors should focus on the iPhone sales and guidance, as well as the management's commentary around supply chain constraints.

Because of Apple’s status as the biggest company in the world by market cap, its results could have a big bearing on the major stock indices, especially the S&P 500 & Nasdaq.