Apple earnings: 'The big question' is about supply chain disruptions, analyst says

DA Davidson Research Analyst Tom Forte joins Yahoo Finance Live to preview Apple earnings, as well as discuss what to expect from the Fed and the future of tech.

Video transcript

BRAD SMITH: And so with more on this and kind of setting this up and previewing it for us and what to expect, we've got Tom Forte, DA Davidson research analyst. Tom, great to have you here. Let's just start with what your expectations are going into this earnings report, aside from what we're seeing in the stock movement here on the day.

TOM FORTE: Sure. So when I think about Apple and I think about reporting the December quarter, the big question is, to what extent was supply-chain disruption-- how did that impact their sales? We knew that in the September quarter, it had negatively affected their sales by $6 billion, and the expectation was that lost sales in the December quarter would be even greater than $6 billion. So I think the first thing we look for for Apple's earnings is, how are they on the supply chain, when are things going to get better, and how should that affect their sales and earnings over the next 12 months?

AKIKO FUJITA: Tom, with that said, you know, Apple's coming off of a big milestone here, crossing that $3 trillion mark in terms of market cap. I know when we had the conversation around that, there were a lot of expectations, a lot of optimism, around what's to come for Apple, particularly the AR-VR headset. I wonder how you're looking at that. I know that's not a this-quarter thing. But could that be potentially a significant driver down the line?

TOM FORTE: So I think that's an excellent question, and I exactly believe what you just suggested, that Apple hit the $3-- $3 trillion market cap mark on the expectation that they're going to have something meaningful when it comes to AR, VR, and also potentially electronic vehicles. The challenge for investors is, it's highly unlikely that Apple is going to telegraph their future product roadmap. So I think the question is, will Apple's management say enough and investors continue to bid up shares of Apple on the expectation that there's going to be these future products-- the AR-VR product, and potentially electronic vehicles-- to drive future sales and profit growth for Apple? And I think that's, you know, to be determined.

BRAD SMITH: You know, getting back to the price movement that we're watching here on Apple as well today, Tom, I would love to know what you're making of this tech sell-off that we've been monitoring closely. And you're seeing Apple down, but that comes with the Dow plunging about a thousand points as of right now. The NASDAQ down heavily by about 4 and 1/2% for the tech-heavy Composite. Is the move here justified, from your standpoint, and especially going into a major Fed decision where we know that in a tightening environment or in a-- the lack of an easy money environment, that tech has tended to see some of this move lower in reaction to what is potentially to come from the Fed and their decision too?

TOM FORTE: Yeah, excellent questions. The way I think about it is, earnings for Apple could not have come at a better time because ultimately, when I think about sell-offs and I would think about pullbacks in the stock market, ultimately, investors are trying to determine what is the appropriate multiple to pay for a stock. So to the extent that Apple is able to show that, hey, their next 12-month sales and profitability looks better than expected, then that may offset some of the investor anxiety on rising rates, which tend to have a negative impact on valuations, especially for technology shares, which often have materially higher multiples than other stocks in the market.

AKIKO FUJITA: So is this a good time to get in? I know you can never time the market, but I wonder if the earnings reports to come are going to, you know, put things back in the driver's seat, if you will. Today, it's about the fears around what we're going to hear from the FOMC policy meeting, and yet we've heard from other guests over and over that, at the end of the day, it's not about broad tech. If you've got a company that is profitable, there's only more upside ahead.

TOM FORTE: If you have a 12-month or long-term investment horizon, it certainly seems like a great time to take a stance, to make a position in Apple, Amazon, even Shopify, some of these other high-quality growth names that have been materially pulled back on the sell-off. So yes, if you have-- the advantage of a long-term time horizon is, you're able to ride out the near-term volatility because it certainly is super volatile right now.