Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Apple Inc. (AAPL): iPhone Launches Mean Tighter Margins

Apple Inc. (NASDAQ:AAPL), for the most part, has seen its gross margins steadily increase over the last few years. Not that long ago, the company posted gros margins under 30 percent, but that had increased to more than 47 percent during the second quarter of 2012 – the quarter before the launch of the iPhone 5. Why is that noteworthy? Because it seems that Apple Inc. (NASDAQ:AAPL) recently posted a below-expected margins report in its most recent quarterly earnings, and the drop seems to coincide with another similar event – the launch of the i5’s predecessor.

Apple Inc. (AAPL)

Apparently there were those analysts and others who might have either forgotten or just didn’t see history coming. Two years ago, when Apple Inc. (NASDAQ:AAPL) launched the iPhone 4, gross margins reported by the company in its quarterly earnings just after that launch plunged from about 57 percent in the prior quarter to about 47 percent, then slowly rose back to prior levels more than a year later.In the wake of disappointing Apple Inc. (NASDAQ:AAPL) margin results in the company’s most recent quarterly report – which includes the quarter in which the iPhone 5 was launched – a couple of analysts have stepped back and presented more optimistic research notes to investors Monday morning – stating that they’ve seen this before and to buy now while the stock is cheap.

Apple Inc. (NASDAQ:AAPL) reported gross margins in the September 2012 quarter to be about 40 percent, which was a sharp drop from the previous quarter’s 47 percent, and below analysts’ expectations of 41.4 percent. But considering the similarities to the iPhone 4 launch a couple years ago – new design, new hardware features and thus some supply and production issues in the first few weeks – it probably should not have been unexpected, and neither should have been the guidance from the company when Apple warned that its margins for the December quarter may fall to as low as 36 percent – a level not seen by Apple Inc. (NASDAQ:AAPL) since 2008.

However, that would make for one small difference from what happened two years ago. According to the chart attached to the article linked earlier, one can see that the iPhone 4 margins hit their low point right after the launch and immediately started back up – this time around, though, Apple Inc. (NASDAQ:AAPL) is projecting margins to fall further for another quarter before rallying. That in itself could e the reason for the stock giving up more ground after the earnings report. Since peaking at $705 a share just prior to the i5 launch, the stock is down 100 points (nearly 14 percent) in about a month.

Despite this, though, Deutshe Bank’s Chris Whitmore wrote in his research note, “We believe near-term margin concern is overblown, and is creating a very attractive entry point for AAPL shares. Reiterate Buy.”

This could be great news for value investors, including existing investors in Apple Inc. (NASDAQ:AAPL) stock like billionaire fund manager Julian Robertson of Tiger Management.

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!