Morgan Stanley: Apple’s margins will improve before the end of 2013

“The fact that Apple beat its GM guidance for Q1 2013 — returning 38.5% profits rather than 36% — fell on deaf ears,” Philip Elmer-DeWitt reports for Fortune. “The Street was convinced that the days of Apple’s 40-plus percent margins were over. The change, as they say, was structural, not seasonal.”

P.E.D. reports, “But in a note issued early Monday, Morgan Stanley’s Katy Huberty finds evidence in Apple’s SEC Form 10-Q that the season of lower margins may be ending, and that the company’s GM% — and share price — could improve significantly in the second half of 2013.”

Read more in the full article here.

MacDailyNews Take: This isn’t rocket science. Apple introduced a raft of new products for the holidays (some even actually shipped to customers!) and new products always cost more to produce initially. As production normalizes and suppliers and assemblers get used to building parts and assembling the new products, the costs decline and Apple’s margins increase. This is nothing new.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]

Related articles:
Apple analysts: Stupid or lazy? – February 3, 2013
Apple’s all-time record quarterly earnings disappoint – January 23, 2013
After posting new all-time record revenue, Apple shares collapse in after-hours trading – January 23, 2013
MacDailyNews presents live notes from Apple’s Q113 Conference Call – January 23, 2013
Apple reports record results: $54.5 billion revenue, $13.1 billion profit, $13.81 EPS – January 23, 2013


  1. … well, everything! than most other companies. Most companies run on their debt while Apple piles up bags of cash. Apple’s P/E is better than most and Apple’s margins are better than most.
    The problem is the gamblers rigging the system. And the analysts … always the idiot analysts.

  2. Good, so long as Apple’s share price doesn’t fall below $400 in the meantime. Even if Apple gets a lucky quarter it’s already so far down it’s likely there won’t be much of a rebound. Apple is being rigged by the hedge funds to fail to deliver returns. They’ll just continue to use whatever money is put in Apple to feed Netflix and Amazon’s gains.

  3. Wall Street: “American business, you need more profits, so outsource manufacturing to China.”

    Capitol Hill: “Apple, you need to bring manufacturing back to the U.S.”

    Tim Cook: “Sigh”

    1. Apple’s margins do not need to increase to maintain the stock price. Apple’s margins would have to drop dramatically along with the company’s future prospects in order for the stock price to drop anywhere close to $250.

      You post quite a bit on this column regarding financial matters, and you are well aware of the underlying value of Apple’s cash and securities position. If AAPL drops anywhere close to $250, I will mortgage my house and pawn everything that I own to buy AAPL shares.

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