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Is it safe to buy Apple shares as supply chain constraints weigh on sales?

By:
on Oct 29, 2021
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  • Apple shares plunged sharply on Friday after announcing its most recent quarterly results.
  • The company reported its fiscal third-quarter earnings Thursday after markets closed, in line with estimates.
  • However, revenue fell short of expectations despite growing by more than 28% Y/Y.

On Friday, Apple Inc. (NASDAQ:AAPL) shares plunged nearly 4% after announcing its most recent quarterly results. The company reported its fiscal third-quarter revenue and earnings Thursday after markets opened, matching earnings expectations. However, Apple’s revenue fell short of estimates, despite posting significant growth from last year.

The company posted FQ3 GAAP earnings per share of $1.24, in line with the consensus for Street expectations. On the other hand, revenue for the quarter grew by 28.9% from the same quarter a year ago to $83.6 billion, missing analyst expectations by $1.63 billion.

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The company cited supply chain constraints as the reason behind the sales miss.

Is Apple’s growth a good bet?

From an investment perspective, Apple’s shares trade at reasonable trailing 12-month and forward P/E ratios of 29.88 and 26.85, respectively. As a result, the stock could be an interesting option for value investors.

In addition, analysts expect the technology giant’s earnings per share to grow by more than 10% this year, before rising at an average annual rate of about 20% over the next five years. There, it could be a compelling option for long-term growth investors.

The stock is up 13.31% this year, thus underperforming the S&P 500 Index, which has gained more than 23%.

Source – TradingView

Technically, Apple shares seem to be trading within an ascending channel formation in the intraday chart. However, the stock pulled back to find the trendline support following its FQ3 results.

Nonetheless, with shares far from reaching oversold conditions, investors could target extended pullbacks at about $143.11, or lower at $139.07, while $149.99 and $154.97 are crucial resistance zones.

It may not be too late to sell

In summary, although Apple is significantly underperforming the S&P 500 Index, Friday’s post-earnings pullback indicates investor concern about supply chain headwinds. 

In addition, the stock is far from reaching oversold conditions, leaving room for more declines.