Apple: Insourcing Can Structurally Lift Gross Margins (Archive)
Apple’s insourcing of networking components can structurally enhance long-term gross margins and returns.
This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.
Elevator Pitch
- My last 'Buy' view on Apple has been playing out, and recent developments have increased my confidence in the stock, prompting me to upgrade my stance to a 'Strong Buy'.
- In-house manufacturing of networking components can reduce reliance on suppliers such as Broadcom and Qualcomm and boost long-term gross margins.
- AAPL trades at a premium vs comps but after 2 years of stagnant earnings expectations, it is seeing upgraded estimates in recent times.
- Relative technicals signal a breakout above previous highs following a period of consolidation/re-accumulation.
- iPhone sales have been broadly stagnant over the past 3 years. Apple plans to reinfuse growth via a launch of a premium foldable iPhone. However, I am a bit skeptical given higher adoption rates for lower-priced models in recent iPhone Series.
Read the full article here.
Disclosures and Disclaimers
Past performance ≠ future results. Not investment advice. See full Disclaimer.
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