Apple (AAPL) Growth at Risk With High-End Smartphone Customers Becoming Content
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Price: $294.62 +0.11%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 0.4%
EPS Growth %: +20.4%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 0.4%
EPS Growth %: +20.4%
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Apple (Nasdaq: AAPL) and rival Samsung have been riding the high-end smartphone gravy train over the last few years, but some speculate that a derailing might happen sooner rather than later.
Bloomberg noted Monday that the companies will likely squeeze-out competition from Nokia (NYSE: NOK) and BlackBerry (Nasdaq: BBRY) over the next few quarters, but the real winners are names like Lenovo and Huawei. Both make low-cost, higher-quality mobile devices, key for capturing more emerging market mobile share.
Apple is slated to report fiscal Q3 results on Tuesday. Street consensus views call for sales of $35.17 billion, just about flat with $35 billion in sales reported during the same period last year. Should the company meet views, it would be the worst year-over-year quarterly performance since a 1.3 percent revenue drop was reported in Q2 2003.
Speculators have hinted that Apple might be releasing a low-cost iPhone model this year, along with its regular device. Though the company garners 50 percent margins on sales of new iPhone devices, the introduction of the iPad mini and sales of older iPhones (which have margins at about 35 percent) have clipped Apple's one-time stellar profit growth. For the quarter ended March 2013, Apple's gross margin fell to 37.5 percent, from 47.4 percent in the same period last year.
Apple's next task is to convince consumers that a wrist watch device is the next wave in tech gadgets. Overall, consumers have been getting more and more satisfied with features on current smartphone models, making it a challenge to convince most that an upgrade is needed.
The next Apple iPhone will come in multiple colors, may have a larger display, and sport a fingerprint reader in the Home button for added security. While those will be nice upgrades, some analysts don't think it will be enough to drive demand for long.
With its strong ecosystem, which includes over 800,000 mobile apps and iTunes, Apple is likely to retain its strong customer base in the interim. Margins in those areas are robust and will continue to be supported even as older iPhone models move into consumer hands (Verizon recently said about half of its iPhone activations in the recent quarter were iPhone 4 or 4S models).
But, if Apple can't appease most with its next offering, it could be a rough ride for the one-time market capitalization leader. Shares are up 0.5 percent Monday.
Bloomberg noted Monday that the companies will likely squeeze-out competition from Nokia (NYSE: NOK) and BlackBerry (Nasdaq: BBRY) over the next few quarters, but the real winners are names like Lenovo and Huawei. Both make low-cost, higher-quality mobile devices, key for capturing more emerging market mobile share.
Apple is slated to report fiscal Q3 results on Tuesday. Street consensus views call for sales of $35.17 billion, just about flat with $35 billion in sales reported during the same period last year. Should the company meet views, it would be the worst year-over-year quarterly performance since a 1.3 percent revenue drop was reported in Q2 2003.
Speculators have hinted that Apple might be releasing a low-cost iPhone model this year, along with its regular device. Though the company garners 50 percent margins on sales of new iPhone devices, the introduction of the iPad mini and sales of older iPhones (which have margins at about 35 percent) have clipped Apple's one-time stellar profit growth. For the quarter ended March 2013, Apple's gross margin fell to 37.5 percent, from 47.4 percent in the same period last year.
Apple's next task is to convince consumers that a wrist watch device is the next wave in tech gadgets. Overall, consumers have been getting more and more satisfied with features on current smartphone models, making it a challenge to convince most that an upgrade is needed.
The next Apple iPhone will come in multiple colors, may have a larger display, and sport a fingerprint reader in the Home button for added security. While those will be nice upgrades, some analysts don't think it will be enough to drive demand for long.
With its strong ecosystem, which includes over 800,000 mobile apps and iTunes, Apple is likely to retain its strong customer base in the interim. Margins in those areas are robust and will continue to be supported even as older iPhone models move into consumer hands (Verizon recently said about half of its iPhone activations in the recent quarter were iPhone 4 or 4S models).
But, if Apple can't appease most with its next offering, it could be a rough ride for the one-time market capitalization leader. Shares are up 0.5 percent Monday.
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