Top analyst says strong iPhone shipments will help Apple beat estimates with its fiscal Q4 results

Apple is expected to release its fiscal fourth-quarter earnings report next Thursday, October 28th. On that date, the company reveals how well certain products have done generating revenue, and while it has been years since the announcement included the number of iPhone units shipped by the firm during the quarter, Apple does reveal the revenue amount attributable to what is arguably its most important product.

Invest banking firm Morgan Stanley's lead analyst, Katy Huberty, released a note to clients yesterday which was seen by AppleInsider. In her note, Huberty told Morgan Stanley's clients to expect strong results from the iPhone and the Services sector which will allow the tech giant to top the consensus forecasts from other Wall Street analysts. Nonetheless, Huberty doesn't expect Apple investors to use the upcoming results to guide their buying or selling decisions.

That's because institutional investors and the little guys will be more focused on the results from the current quarter that ends on December 31st, 2021. This is Apple's fiscal first quarter of 2022 also known as the company's holiday quarter. Because the latest and greatest iPhone models account for only a small amount of company revenue during the fiscal fourth quarter, professional money managers tend to put more weight on the holiday quarter when it comes to determining whether they should be buying or selling Apple shares.

Apple could be facing some tough year-over-year comparisons soon thanks to issues with the supply chain, possible changes to how Apple profits from the App Store, and the global chip shortage. Huberty now expects Apple to report fiscal fourth-quarter revenue to hit $88.2 billion for a 36% annual gain. If Apple does match or exceeds Huberty's revenue forecast, it will have topped Wall Street's expectations of $84.8 billion.

The Morgan Stanley analyst raised her forecast because of higher iPhone, iPad, and Mac shipments. Huberty says that the Cupertino-based firm should report earnings per share (EPS) of $1.31 for the quarter and $5.69 for the year. Those estimates top Wall Street's consensus by 7% and 3.6% respectively. For fiscal year 2022, the analyst now expects $397.1 billion in revenue and earnings per share of $5.90 for a 3.7% increase.

Huberty says talk about an iPhone production shortfall is "overblown" and believes that Apple will ship 238.5 million iPhone units this year. She did move two million units from the current quarter into the fiscal first quarter of 2022. The analyst also sees iPhone pricing to help Apple as the average selling price for the device could be $883 next fiscal year compared with the consensus figure of $824.

Morgan Stanley recommends that portfolios overweight Apple and the firm has a 12-month price target on the stock of $168 which would give the company a price-to-earnings ratio (P/E) of 28. Apple's shares are currently trading at $149.01, down 47 cents or .31% today. The 52-week high is $157.26 and the 52-week low is $107.32.

Besides the iPhone, Apple has seen a surge in iPad demand dating back to the start of the pandemic. It also has the most popular timepiece in the world with the Apple Watch and the leading True Wireless Stereo earbuds with the AirPods. The latest Series 7 watch has just been released and Apple has just announced its third-generation AirPods. The former could have a positive impact on fiscal first-quarter 2022 numbers while the new AirPods model might also have an impact (albeit smaller) on the results for Apple's fiscal Q1 for 2022.

During the fiscal fourth quarter of 2020, Apple reported iPhone revenue of $26.44 billion as the pandemic pushed back iPhone 12 shipments by a month. That resulted in a 20.7% year-over-year decline in iPhone revenue. This year, with Apple able to ship the new model during September, we should see a huge annual increase in iPhone revenue for the fiscal fourth quarter.

Next Thursday, Apple will report its results for the fiscal fourth quarter after the market closes at 4 pm EDT. Make sure to check in with us here at PhoneArena to see how Apple performed from July through September.