Apple (AAPL) Sept. Margin Guidance Stirs Controversy
Shares of Apple (NASDAQ: AAPL) climbed on Wednesday following positive Q3 results. Apple also provided margin guidance of 36%-37% for September quarter, creating debate on Wall Street. In the view of Deutsche Bank's Chris Whitmore, the margin guidance raises questions about its upcoming new product cycle.
"It is difficult to read much into this guidance as Apple provided very little color as to what is driving the wider range of potential revenue outcomes ($3B range vs. $2B provided last quarter). Apple also refused to say whether or not the quarter included a significant product transition and/or if the product transition would have a material impact on the September quarter," said Whitmore.
"As a result, investors gained no additional clarity on 1) the timing of the new iPhone launches 2) the expected impact of the low-end iPhone on margins and 3) whether iPhone 5S will be initially dilutive or additive to margins vs. iPhone 5. In fact, the better-than-expected margin guidance gives rise to concerns that the new iPhones could either come at the very end of the September Q (and have no material impact in September) or is pushed in to the December Q (Fall begins on September 22nd)," he said.
If this is true, it would be a surprise to many on Wall Street.
Deutsche Bank has a Buy rating on Apple with a price target of $480.00
For an analyst ratings summary and ratings history on Apple (NASDAQ: AAPL) click here. For more ratings news on Apple click here.
Shares of Apple closed at $418.99 yesterday, with a 52 week range of $385.10-$705.07.
"It is difficult to read much into this guidance as Apple provided very little color as to what is driving the wider range of potential revenue outcomes ($3B range vs. $2B provided last quarter). Apple also refused to say whether or not the quarter included a significant product transition and/or if the product transition would have a material impact on the September quarter," said Whitmore.
"As a result, investors gained no additional clarity on 1) the timing of the new iPhone launches 2) the expected impact of the low-end iPhone on margins and 3) whether iPhone 5S will be initially dilutive or additive to margins vs. iPhone 5. In fact, the better-than-expected margin guidance gives rise to concerns that the new iPhones could either come at the very end of the September Q (and have no material impact in September) or is pushed in to the December Q (Fall begins on September 22nd)," he said.
If this is true, it would be a surprise to many on Wall Street.
"In short, we believe the combination of 1) a long summer without new product catalysts and 2) unresolved margin concerns will keep a lid on AAPL's valuation in the near term. As a result, we expect shares of AAPL to stay in a holding pattern until we get closer to the launch of the new iPhones / iPads. That said, we recommend longer-term investors increase exposure to Apple over the interim period ahead of the reacceleration of its product," concluded the analyst.
Deutsche Bank has a Buy rating on Apple with a price target of $480.00
For an analyst ratings summary and ratings history on Apple (NASDAQ: AAPL) click here. For more ratings news on Apple click here.
Shares of Apple closed at $418.99 yesterday, with a 52 week range of $385.10-$705.07.