A Wedbush analyst expects that Apple will hand in a beautiful answer when it announces its earnings in late October, but he added that supply constraints may cause iPhone shortages during the holiday season. In an explanation to investors, Wedbush chief analyst Daniel Ives said that despite concerns about the continued shortage of global chips, Apple will still see significant room for growth in each of its product categories.
The current consensus is that Apple’s total revenue is expected to reach 84.8 billion US dollars, which may be 1 billion US dollars more than this figure. Looking ahead, Ives pointed out that supply constraints may be the main topic of concern for investors and analysts, and Apple is likely to need to cut iPhone production as a result, which may cause the December quarterly guidance to be a bit complicated.
The global demand for Apple’s iPhone has been strong, especially in the United States and China. If consumer demand remains at the current rate, Apple is likely to encounter a shortage of up to 5 million iPhone 13 models. However, cutting the output of 5-10 million units should not worry investors, because it can ultimately show that the demand trajectory is stronger than market expectations.
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According to the analyst, the supply shortage is just a slow bump in the multi-year supercycle that can be seen as the beginning of the iPhone 12. Apple is still one of the technology companies Wedbush believes is the most worth buying its stock. The combination of its huge service business and iPhone product cycle will make the company’s market value reach $3 trillion in 2022.
Ives maintains its Outperform rating on Apple, with a 12-month target price of US$185. The valuation of each part is based on Wedbush’s estimate of Apple in 2022, including 16 times that of the service business, or $1.3 trillion, and 7 times that of Apple’s other hardware business, or $2.1 trillion.