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The Chip Crunch Won’t Take a Big Bite Out of Apple

If 2020 was the year of the Covid-19 pandemic’s onset, then 2021 has been the year of the recovery and widespread shortages. Gadget makers like Apple (NASDAQ:AAPL) have struggled, more or less, due to the semiconductor supply crunch, and some who hold AAPL stock might be worried.

An Apple (AAPL) MacBook Air laptop sitting under bright purple lights.
Source: WeDesing / Shutterstock.com

Not that Apple is in any real trouble. If anything, the company has been firing on all cylinders in 2021. Indeed, Apple’s fiscal third-quarter earnings report indicated that the company’s revenues were up 36% and set a new record.

However, Apple has to prove itself once again as the company’s fiscal fourth-quarter earnings release is scheduled for Oct. 28. Can Apple meet and beat Wall Street’s expectations amid an ongoing microchip shortage?

This concern may have contributed to a recent dip in the Apple share price. Still, we can expect the anxiety to subside at some point. After all, Apple is known to deliver when the going gets tough, and the bulls have consistently prevailed in the end.

A Closer Look at AAPL Stock

After peaking on Sept. 7 at $157.26, AAPL stock gave traders a nice, delicious dip to $140.

Even if the upcoming earnings report is a big miss, it shouldn’t take very long before the Apple share price resumes its upward climb.

Remember, winning in the stock market means taking what has happened historically, and extrapolating it into the future. In the case of AAPL stock, every dip has been buyable, so why shouldn’t this pattern continue?

Besides, even with the stock’s strong historical performance, Apple shares aren’t really overvalued.

InvestorPlace contributor Stavros Georgiadis recently used an important valuation metric to confirm this point. “AAPL stock has a PEG ratio [second quarter, trailing 12-month] of 0.5, well below 1.0, which signals it is undervalued,” Georgiadis observed.

To that, I’ll add that Apple’s trailing 12-month price-earnings ratio is 29.1, which isn’t excessively high.

The Elephant in the Room

Delays are often a problem in the realm of tech gadgets. This year has been particularly frustrating as consumers have had to put up with unusually long delays.

And unfortunately, orders for Apple’s iPhone 13, ninth-generation iPad, iPad mini, MacBook Pro and Apple Watch Series 7 reportedly won’t be fulfilled until November or even December.

This is a major problem as the holiday season should be a lucrative time for Apple.

However, there’s a well-known obstacle in the way. As Wedbush Securities analyst Dan Ives put it, navigating the supply crunch is the “elephant in the room.”

The semiconductor shortage has evidently wreaked havoc on the supply cycle. For example, if you order an iPhone 13 Pro today, you might not receive it before the Thanksgiving holiday and even Black Friday.

Naturally, this will cause some consternation among Apple’s loyal fans if they have to forgo their favorite tech products.

The company had previously expected to make 90 million iPhone units in 2021’s final quarter, but now plans to cut that number by 10 million units.

Just a Speed Bump

As the next quarterly fiscal report draws near, all of the foregoing issues are duly noted and, we might assume, already priced into AAPL stock.

If anything, a jittery market should set Apple up for an earnings beat. Sometimes, businesses can exceed expectations simply by weathering a storm.

The experts on Wall Street are reportedly expecting Apple to post total fourth-quarter revenues of $85 billion. They’re also anticipating that Apple will announce earnings per share of $1.23.

Ives doesn’t seem overly concerned about whether Apple hits those marks or not. He’s maintaining his “outperform” rating on AAPL stock, along with an optimistic $185 price target.

His firm views “near-term supply chain issues as nothing more than a speed bump on a multi-year supercycle iPhone 12/13 that continues to play out with FY22 Street numbers looking conservative at this juncture,” Ives explained.

The Bottom Line

As you can see, Ives isn’t letting Apple’s supply-chain issues turn him into a pessimist.

You don’t have to worry about Apple, either. The company’s current problems are likely to be temporary. Moreover, they’re already known and factored in prior to the upcoming earnings release.

So, feel free to hold your AAPL stock shares through the earnings report, and through all of the challenges that Apple will face this year and beyond.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2021/10/chip-crunch-wont-take-a-big-bite-out-of-aapl-stock/.

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