Apple Fails to Dodge Supply Chain Woes

The global supply chain pressures are hurting some big players. Earlier last week, Apple (Nasdaq: AAPL) announced its fourth-quarter results that failed to meet market expectations as the company reported an impact of $1.5 billion on account of supply chain challenges. But Apple continued to release new products and services across the spectrum to expand its global market reach.

Apple’s Financials

Apple’s fourth quarter revenues grew 29% to $83.36 billion, missing the market’s forecast of $84.98 billion. This was the first time since 2018 that Apple actually missed the market’s estimates. EPS was $1.24, in line with the market’s estimates.

By segment, iPhone revenues grew 46.98% to $38.87 billion. Mac sales grew 1.62% to $9.18 billion and iPad sales grew 29.25% to $8.25 billion. Revenues from Wearables grew 11.54% to $8.79 billion. The services segment revenues grew 25.62% to $18.28 billion.

Apple has been trying to expand in China, and its efforts appear to be paying off. Revenues from China grew 83%, and recent reports suggest that the market is warming up to Apple’s devices. There appears to be strong demand in the region for iPhone 13 as it appears to be taking market share from Huawei. Even App Store growth in China accelerated despite the introduction of gaming time limitations imposed by the government on children under 18.

Apple did not provide any forecast for the current quarter. The market estimates revenues of $118.13 billion and an EPS of $1.88 for the first quarter and revenues of $381.58 billion with an EPS of $5.71 for the year.

Apple’s Product Expansion

During the quarter, Apple announced its new iPhone 13 lineup, in addition to the Apple Watch Series 7, iPad, and iPad mini. The new iPhone 13 lineup, including the iPhone 13, iPhone 13 mini, iPhone 13 Pro, and Pro Max introduce a new standard with superfast performance, advanced camera systems, longer battery life, and brilliant Super Retina displays. It also announced the launch of the ninth generation iPad, including a sharp display and twice the storage as compared to the previous generation, as well as the new iPad mini with a portable design and impressive speed and performance. Apple recently announced the new MacBook Pros that are powered by M1 PRO and M1 Max chips with improved performance and battery life. It also announced new AirPods with special audio and industry-leading sound, longer battery life, and an all-new design.

Besides products, Apple is expanding its service offerings as well. It recently announced a new subscription tier to Apple Music called Apple Music Voice, which offers subscribers access to the services catalog of 90 million songs, all through Siri. The latest upgrade of iOS 15 and iPadOS 15 continue to enhance the ways people stay productive. Features include services like Focus that help them avoid distractions or Quick Note that help users capture a thought. macOS Monterey also offers new ways to connect with friends and family and work fluidly across Apple devices.

Within content, Apple TV+ continues to improve its offerings. Its content won 11 Emmys including the award for Outstanding Comedy Series for Ted Lasso. Apple added more content with second seasons for Ted Lasso, The Morning Show, and Truth Be Told.

In the wearables, it released major updates to Fitness+, including the addition of new activities like meditation and Pilates. It also announced Group Workouts, a feature that will help connect friends during a fitness session. Fitness+ will soon be available in 15 new countries around the world.

Apple appears to be all set for the upcoming holiday quarter. But its biggest limitation will be the supply chain constraints that continue to dominate the market. Analysts believe that despite those limitations, Apple will see a stronger March quarter given the growing backlog, iPhone channel inventory below target levels, and the inclusion of the Christmas to New Year eve week in the March quarter.

Its stock is trading at $149.80 with a market capitalization of $2.46 trillion. It touched a 52-week high of $157.26 in August. The stock was trading at a 52-week-low of $107.32 in November last year.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

Photo Credit: Maxx Girr from Pixabay