Apple Earnings: Guidance Will Be Key – The Motley Fool

Apple (NASDAQ:AAPL) is set to report results for its first quarter of fiscal 2022 next week. Many investors will likely be watching the report closely, as it’s coming after a bearish start to 2022 for many tech stocks (including Apple). The tech-heavy Nasdaq Composite has slid 8% year to date and Apple is down 6.5%. Could Apple’s report give a reason for investors to be more optimistic?

While there are a handful of important metrics investors should watch when Apple reports earnings, including revenue growth, earnings-per-share growth, and momentum in key segments like services and iPhone, one of the most important metrics for investors may be the guidance management provides for fiscal second-quarter revenue.

An Apple store in Berlin, Germany.

Apple store. Image source: Apple.

A window into supply constraints

One challenge for Apple recently has been supply constraints and logistical challenges. These supply and logistical issues led to around $6 billion of lost revenue in fiscal Q4, Apple management anticipated. “It is affecting … pretty much most of our products currently,” Apple CEO Tim Cook explained in the company’s fiscal Q4 earnings call.

Further, Cook said that he expected chip shortages to continue plaguing the company in fiscal Q1. Overall, he thinks the lost revenue in the quarter will be worse than in fiscal Q4.

So the question going into Apple’s fiscal Q1 update is whether these constraints are improving headed into fiscal Q2. Investors will likely get some insight into whether this is the case by looking at the company’s revenue guidance.

On average, analysts are expecting Apple to guide for fiscal second-quarter revenue of $90.6 billion. Highlighting how analysts may be convinced that supply challenges will persist in the quarter, this guidance only represents 1% year-over-year growth from the company’s $89.6 billion of revenue in the second quarter of fiscal 2021. Further, it represents a slowdown from the 7% growth analysts are expecting from the first quarter of fiscal 2022 and the 29% growth Apple posted in its fourth quarter of fiscal 2021. 

But if Apple’s supply constraints have eased, the company may provide a revenue outlook that is well beyond this figure. The company’s revenue guidance for its fiscal second quarter, therefore, will be telling.

Looking beyond the numbers

Of course, investors will want to look beyond the numbers and see what management is saying, too. While Apple’s revenue guidance for fiscal Q2 will provide some directional context regarding supply-and-demand performance, investors will need to look for management to provide more details on how significantly it expects fiscal Q2 to be impacted by supply-chain issues to fully understand how much of the guidance (if any) is related to these constraints.

Apple reports its fiscal second-quarter results after market close on Thursday, Jan. 27.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.


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