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.

What’s Apple Inc. (AAPL)’s Next Game-Changer?

Page 1 of 2

Apple Inc. (NASDAQ:AAPL) stock slid during Tuesday’s trading session despite a strong surge in the broader market that saw the S&P 500 climb more than 0.5%. One possible reason for the decline is a research note out of Citigroup Inc. (NYSE:C) that strongly suggests margins will continue to face pressure as consumers opt for lower-priced devices. Apple stock, which topped $700 last fall, fell below $400 recently and has traded in the mid-$400 range ever since. Regardless of Cupertino’s ability to innovate, if Wall Street sees margins come under pressure, this may be the game-changing catalyst needed to break the current trading range. Unfortunately, it looks like it could be to the downside.

Opinion in the Citi on Apple stock
In a recently released research note, Citi’s Glen Yeung reiterated his neutral rating, citing concerns over margin pressures at Apple Inc. (NASDAQ:AAPL). The driving force behind these pressures, in Yeung’s opinion, is a product mix that is shifting toward cheaper products. Not only is Apple selling more older iPhones — including the iPhone 4 and iPhone 4S — it is poised to release a cheaper iPhone. He also referenced the possibility that the company may release cheaper version of the iPad to be more competitive with various Google Inc (NASDAQ:GOOG) Android tablets, like the Nexus 7 or Kindle Fire.

Last March, IDC reported that Android tablets had continued to expand their market share at the expense of iOS devices. A reasonable driver of this trend is the price difference that exists between Android and iOS tablets. According to the report, Android will command 48.8% of the market in 2013, relative to 46% for iOS. Additionally, IDC sees a significant shift to smaller tablets as the preferred size.

Apple Inc.There are rumors that Microsoft Corporation (NASDAQ:MSFT) wants to get into the cheap tablet game with the possibility that it will acquire the remaining piece of Nook Media that it does not own. This would allow the company to round out its own tablet offerings beyond the Surface RT and Surface Pro, each of which carries much higher price tags. While an insider denies the rumor, the acquisition could make the company’s tablet offerings more interesting. Competition is the small tablet space from both Google Inc (NASDAQ:GOOG)and Microsoft has kept pressure on Cupertino and had a negative impact on Apple Inc. (NASDAQ:AAPL) stock.

Ultimately, Yeung sees the margin pressures that the weakening product mix creates as a negative for Apple stock, and a significant reason that shares will remain range-bound looking ahead. Adding to this pressure is the fact that global growth rates are slowing based on mobile saturation. These combined pressures may keep Apple Inc. (NASDAQ:AAPL) stock from returning to previous highs in the foreseeable future.

Page 1 of 2
Loading Comments...