Yet another Apple investor concern: Gross margin declines

“While many Apple investors are worried about iPhone sales falling for the first time ever on a year-over-year basis, Credit Suisse analyst Kulbinder Garcha has raised another concern: a possible decline in gross profit margins,” Patrick Seitz reports for Investor’s Business Daily.

“‘We continue to see evidence of a subdued iPhone 6S cycle,’ he wrote. ‘We again adjust down our iPhone estimates for March and calendar year 2016 to 48 million and 207.2 million (units) respectively,'” Seitz reports. “Apple’s gross profit margins are poised to decline, he said.”

“He sees several items negatively affecting corporate gross margins over the next 12 months. They include lower gross margins for the iPhone 6S cycle vs. the iPhone 6 cycle, a lower mix of 5.5-inch iPhone 6S Plus sales, and foreign currency headwinds,” Seitz reports. “He predicts Apple’s gross margin will slip to 38.8% in calendar 2016 and 38.6% in 2017 from 40% in 2015.”

Read more in the full article here.

MacDailyNews Take: Oh, goodie, more “concerns.” iPhone-centric, no less. Just what we need!

SEE ALSO:
Goldman Sachs: Apple is ‘a compelling buying opportunity’ – January 20, 2016

[Thanks to MacDailyNews Reader “David E.” for the heads up.]

24 Comments

    1. Double the benefits:
      A) Short the stock and win.
      B) Then buy the burned stock and win.

      Who better to pull this manipulation on than AAPL, which has to be one of the most resilient stocks on the market, vastly undervalued even before this lunacy started.

      C) Sell it again at its inevitable high.

      Rinse
      Repeat

      Sucks don’t it.

      1. SEC also needs to halt HFT: High Frequency Trading.

        It does not increase liquidity. It lets Wall Street burn buyers and sellers both by having their supercomputers step in between trades unbeknownst to all. Plus, the computer algorithms contribute to increased variability in share prices.

        SEC, other regulators, Congress, Mr President: put a halt to HFT. It will make America stronger.

        1. Guess what, though? The group that benefits from HFT is a tiny percentage of the population, but politicians will do what they want, instead of what’s good for the people. Don’t forget that.

    2. I think there is a possibility that Apple may have had a decline in ASP. This may not be fud.

      I think the only ‘Plus’ that should be in the line up is the top tier flagship, the iPhone 6S Plus. The iPhone 6 Plus should no longer be available and may have lots of people opting for a bigger screen with less features (Another issue since apple is trying to incorporate new features to their user base with 3D Touch). Obviously the 6 Plus has a lower ASP.

      Also, maybe they should keep doing a ‘C’ every other year in order to put last years phone in a plastic package to temper slightly its premium feel. I just feel as thou a lot of people are walking into an Apple Store and having a hard time seeing the value between the 6 and 6S in their hand. The C didn’t sell that well because it was clearly not Apple’s flagship phone, but it pushed people toward it. Sounds like a worthy knight to fall on a sword.

      1. The truth that shows that Timmy’s strategy of offsetting the slim margin of iOS goods with a handful of overpriced luxury products is not working.

        If Apple wants to keep its margins at historic levels, it has to innovate with regular improvements to the Mac platform. Apple has done an absolutely dreadful job on this in the past 7 years. Instead of offering more, better, faster, higher end Macs with a very impressive portfolio of professional level software, what has Apple done with the Mac platform? It’s undermined it to the point where Apple can’t maintain historically high margins on the Mac.

        Meanwhile it also sells 6 year old standard resolution displays and 802.11n Airport Express units, all neutered & sealed Macs for premium prices and — and now Tim wonders why people are losing interest ?????

        Apple is wise not to join the race to the bottom, but consumer-grade hardware does not garner premium margins. Apple needs to step up with superior hardware and software on the Mac platform.

            1. Per product margin is not known to anyone but Apple……. But overall on average apple gets 40% margins….. Some products higher .. Some lower im sure.
              Mindind you aprox 70% of apple revinue comes from ios devices… …

              But to say “Tim’s strategy of offsetting the slim margin of iOS goods with a handful of overpriced luxury products is not working.” Is one of the most uneducated comments i have ever heard about apple !

            2. You you’re arrogant enough to claim my comments are “undereducated” while you yourself can’t refute anything I said with facts of your own????

              If you were selling impressive numbers of Hermes bands and $12k gold watches, would you keep it a big secret?

            3. Green are you the sane as Mike ?
              Anyway its not my arrogance… Its the comment that makes it uneducated.. Or if you prefer not studied enough .

            4. Green, you are as ignorant as ignorant can be. Apple’s margins have grown consistently as iOS devices have made a bigger portion of revenue. This easily shows that iOS margins are much higher than Macs. Crawl back under your rock.

            5. You guys are all missing the big picture. Whether or not Apple maintains high margins on any one product is not the whole story. Sales matter, and so financial tools can make expensive relatively disposable devices (those with sealed batteries/RAM/etc and no easy way to repair) look cheap. The end user spends more money because every 2-4 years he needs a new one.

              A Mac, which has this margins at the mini and fat margins at the Mac Pro end of the spectrum, simply isn’t replaced by the consumer as fast.

              THAT is why Cook is pushing Apple to become an iOS-focused company.

              Which is sad, because Mac users deserve better.

              I stand by my comments that Angela’s uber-priced accessories are a waste of time. Very few people give a fart about overpriced fashion that you can always find in the bargain bin next year.

  1. With the strong dollar and weak renminbi (and all other foreign currencies), I would think Apple’s gross margin would increase. Everything made overseas should be relatively cheaper for Apple to buy, right? Plus commodity prices are down. And shipping and transport costs should also decline due to silly cheap fuel prices. Am I missing something?

  2. Apple stock is vulnerable to manipulators etc as due to it’s high profile ‘fomenting’ news (FUD rumours) of the stock is easily disseminated BUT we also have to admit that the stock is down also to some issues with Apple.

    For example:

    1) the P.E is stupid low, less than the S&P average, if it had the P.E of Google the stock would be well over 200 now. Low P.E means lack of investor confidence.

    So Apple P.R has been unable to convince the big investors about buying the stock convince them on how good Apple is doing.

    Apple P.R and marketing has been extremely weak. It has been unable to counter numerous FUD attacks by analysts etc or even do a good product marketing job in some areas (see below).

    Apple spends crazy little on P.R and marketing (like 10% what other less profitable companies spend). When Apple P.R today concentrates with ‘Social Issues’ like Diversity , Gay rights versus Product or Sales. P.R making videos of Gay Parades (even if socially good) does precious little to convince mutual funds to buy aapl when when it doesn’t counter FUD like ‘low sale numbers, production problems, Google technology lead …’ etc

    (remember the confused Apple Watch launch when there was the bizarre ADVERTISED Apr 24 date , when the stock ran out before that date there was NO correction and no stock in store. I was waiting and waiting for Apple P.r to do something , to sooth consumers and the press… NOTHING. Later P.R released a video on the San Francisco Gay Parade. Note flamers I am NOT bashing gays just pointing out what happened ).

    Steve Jobs was Apple’s P.R and Marketing genius (he was probably one of the greatest marketing guys ever). without it Apple has been struggling.
    (Bezos of Amazon is also a P.R master. )

    Cook recognizes this and has been trying although somewhat unsuccessfully. A couple years back he fired both the P.R chief and head of USA marketing in one week. Recently he hired a new V.P of media marketing (Tor Myhren). etc.

    Big investors I suspect are somewhat concerned that the CEO seems much more passionate (that’s the ‘impression’ anyways) on social issues rather than practicalities of running the company.

    2) Weak and confused marketing has led to other flubs like the Bono Free Album (costing many millions), Apple Music launch and the really REALLY bizarre lack of Mac Marketing.

    One BIG concern of big Apple investors (if not NUMBER ONE) is that they think Apple is a ONE PRODUCT COMPANY.
    yet Apple doesn’t advertise Macs and hasn’t had a SERIOUS mac campaign since Mac PC guy (66 different ads) years ago.
    In spite of this no mac marketing Mac revenue today is near equal iPads !!
    In spite of iPads having numerous ads every year.
    Imagine if Apple had run a few more Mac ads ! I bet Mac sales numbers would be even higher (Note Macs have LOWER market share than iPhones, way lower than iPads thus great room to grow).

    apple is like a car company like Ford which decides to advertise only its cars and not it’s trucks. Bizarre especially with years of Win 8 Floundering. IBM today is doing more selling Macs than Apple !

    I don’t have space to go into how Apple has also ignored certain Mac products and Mac users , suffice to note Apple’s flagship Mac the MacPro has 3 GB cards in the highest version vs PCs today with 12 GB cards.

    3) I can talk more on apple’s issues related to the stock price like the problems with some of the new product launches but I’m too long already.

    Apple has done plenty of good stuff, most new products are good and just needs ‘tweaking’, but on some issues Apple leaders need to ‘focus’.

    FLAMERS who one star on reflex any apple criticism please read my points and consider before flaming

  3. Read it.. And could not agree more on the PR and advertizing end…. On all profucts… Its seens like a total void relatively speeking ….. And a few botched product launches a few half backed implementations (tvos …sigh )etc.
    Some of these decisions are truly mind boggling …. …

    My theory has been that maybe apple does not want to push the stock higher till their buyback is done… They and hopefully us in the long run will benifit from that .
    But im am also kind of losing confidance in that theory …

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