Apple cautions that sales growth will slow to ‘very strong double-digits’ after record-setting earnings

Apple slipped in after hours and pre-market trading after warning that sales growth may be slowing, albeit to “very strong double-digits,” and supply constraints are rising, putting a damper on investor excitement following a record-setting third quarter.

Apple Park, Cupertino, California
Apple Park, Cupertino, California

Mark Gurman for Bloomberg News:

The company said on a conference call Tuesday that supply constraints will affect the iPhone and iPad in the current quarter. Decelerating demand for services also will drive the slowdown.

The cautious remarks followed a sales gain of 36% in the third quarter, with revenue of $81.4 billion shattering Wall Street’s $73.8 billion estimate. But investors are sticking to a wait-and-see attitude. The parts shortages and a patchwork of Covid restrictions will continue to weigh on Apple’s business this year.

For now, business is booming. The iPhone, Apple’s core product, grew about 50% to $39.6 billion last quarter, beating projections of $34.6 billion. The third quarter is typically one of Apple’s slowest periods — with consumers holding out for new phone launches around September — but the 5G iPhone 12 [family of models] appears to have helped the company buck that trend.

And the company still expects “strong” double-digit growth in the fourth quarter… Even with the muted reaction to the results, Wedbush Securities analyst Dan Ives said they should help lay the groundwork for Apple to reach a $3 trillion market value over the next year.

MacDailyNews Take: Apple is more than fine. The company is projecting “very strong double-digit growth” for fiscal Q421 (calendar third, or September, quarter). This market overreaction, too, shall pass.

We expect very strong double digit year-over-year revenue growth during the September quarter. We expect revenue growth to be lower than our June quarter year-over-year growth of 36% for three reasons:

First, we expect the foreign exchange impact on our year-over-year growth rate to be three points less favorable than it was during the June quarter.

Second, we expect our services growth rate to return to a more typical level. The growth rate during the June quarter benefited from a favorable compare, as certain services were significantly impacted by the COVID lockdowns a year ago.

And third, we expect supply constraints during the September quarter to be greater than what we experienced during the June quarter. The constraints will primarily impact iPhone and iPad.

We expect gross margin to be between 41.5% and 42.5%.Apple CFO Luca Maestri, July 27, 2021

As for Apple hitting hit $3 trillion market cap by mid-2022, it’s totally doable.MacDailyNews, January 13, 2021

1 Comment

  1. but but but…..APpLE is stilllll doooomed……but but……

    RTFO Apple………………..

    AAPL reiterated Outperform with a $185 price target at Wedbush
    AAPL price target raised to $180 from $175 at Evercore, outperform
    AAPL price target raised to $175 from $166 at UBS
    AAPL reiterated Overweight and TOP PICK with a $175 price target at JPMorgan
    Apple price target raised to $175 from $167 at DA Davidson
    Apple price target raised to $175 from $165 at Deutsche Bank, BUY
    Apple price target raised to $168 from $166 at Morgan Stanley, BUY

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