re AAPL _ agree it's cheap but bottom line growth in very uncertain. The key point is the gross margin, that is where an fundamental analysis with AAPL needs to start. Most sell side analysts have the gross margin (which went from ~45% to 38%) recovering to 40%. I think gross margin has a long way to fall and might go to 35% next year. LT consumer products tend to be below 25%, so there is a lot of air underneath.
Also, AAPL right now spent's very little on R&D and I expect that number to go up over time. Both factors create pressure on profit margins, which are almost at 30% pre-tax now and almost have nowhere but to go down.
Reasons for gross margin reduction: Increasing competition in top line phone, increasing contribution from ipad, ipad mini (which has lower gross margins) and introduction of low cost iphone. My baseline scenario tells me that they have to grow the topline in the low double digits just to keep the bottom line the same. This is all done on a back of the envelope type calculation, based on what I saw in analyst reports but with adjusted gross margins.
There is good upside, if the gross margin goes back to 40% and they develop new products (those two go pretty much hand in hand) and keep growing.
Near term, I think the next quarter is going to be soft (reason: softness reported by suppliers, eminent product change - iphone 5S etc). This quarter will be OK most likely but nobody cares about the present and past as the stock market looks forward.
This is how I see it, having spent a limited amount of time on it. |
