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Apple to report solid Q4 earnings but may face iPhone shortages, analyst says

Credit: Andrew O'Hara, AppleInsider

A Wedbush analyst is expecting Apple to beat across the board when it reports earnings later in October, though he adds that supply constraints could lead to iPhone shortages in the holiday quarter.

In a note to investors seen by AppleInsider, Wedbush lead analyst Daniel Ives says that Apple will deliver clear upside to Wall Street consensus in each of its product categories, despite concerns about an ongoing global chip shortages.

Current consensus expects Apple to report total revenues of $84.8 billion. Ives believes that Apple is likely to beat that by at least $1 billion.

Going forward, Ives does note that supply constraints could be the primary topic of concern among investors and analysts. Apple is likely to need to cut iPhone production numbers because of them, which could lead to December quarter guidance that's "a bit mixed," Ives said.

Demand for Apple's iPhones has been robust across the globe, particularly in the U.S. and China. Ives says that Apple will likely run into an iPhone 13 model shortages of up to 5 million units if consumer demand keeps up at its current pace. However, Ives says that production cuts of five to 10 million units shouldn't worry investors, since it ultimately "speaks to a stronger demand trajectory than the Street had been anticipating."

The analyst calls the supply shortages a "speed bump" in a multi-year supercycle that kicked off with the iPhone 12. Apple is still one of Wedbush's top tech names to own.

"Our favorite large cap tech name to play the 5G transformational cycle is Apple, with the 1-2 punch of its massive services business and iPhone product cycle translating into a $3 trillion market cap for Cupertino during 2022 in our opinion," Ives writes.

Ives maintains his Outperform rating for Apple and 12-month price target of $185. The sum-of-the-parts valuation is based on Wedbush's 2022 Apple estimates, include a 16x multiple on Services at $1.3 trillion and a 7x multiple on $2.1 trillion for the rest of Apple's hardware business.