Two Positives and Two Negatives From Apple Inc. (AAPL)’s Earnings Report

CFO Peter Oppenheimer promised more products this fall and in 2014. Whether they will be completely new devices (or just refreshed models) remains to be seen, but it’s no coincidence that the stock’s decline has coincided with a lack of new products.

A refreshed iPhone, iPad and iPad Mini are a given, but based on reports, a smartwatch, TV and cheaper iPhone could also be unveiled.

Negative: gross margin continues to decline

Apple Inc. (NASDAQ:AAPL)’s gross margin continues to fall. It’s now down to just 36.9% — from a high of 47% over a year ago. Apple expects gross margin to come in between 36% and 37% next quarter.

The longer Apple goes without introducing fundamentally new products, the more the company’s gross margin will decline. The iPad Mini now accounts for the majority of iPads sold, while the iPhone 4 continues to sell well.

If the rumors suggesting that Apple is planning to release a cheap, plastic iPhone this fall are true, gross margin should decline still further. Samsung — which offers smartphones at every price point — sells its cheapest handsets near cost.

Investing in Apple

The recent quarter wasn’t enough to change the case for Apple Inc. (NASDAQ:AAPL). Still, there are a few trends investors ought to keep their eyes on.

The better than expected iPhone sales should be seen as a positive sign, particularly because rivals (like Samsung) have warned of disappointing handset sales.

However, the drop in iPads is a bit troubling. Perhaps the tablet market won’t offer the growth many had hoped for — it could be nearing saturation. I don’t think the Surface RT, even at a much lower price, is a threat to the iPad, although Microsoft’s efforts to catch up are worth watching.

Ultimately, Apple’s future will come down to its new products. If the company can unveil some revolutionary devices, it could continue to grow. Otherwise, its gross margin will decline further, and the record quarters of the last few years won’t be repeated.

The article 2 Positives and 2 Negatives From Apple’s Earnings Report originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple Inc. (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT). Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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