Apple Inc. (NASDAQ:AAPL) continued to draw attention from media and investors over the last week, following the launch and rollout of the new iPad mini. Apple’s new device is specifically meant to expand the company’s total addressable market TAM, and it began shipping late last week, across several stores in New York, Canada, Singapore, and the U.K.
One of the recently launched products, the iPhone 5, has been criticized of not living up to expectations. This bearish mindset has seen the stock perform a u-turn, after notching $705 per share in September, to trade below the $600 mark. The bottleneck in supply was a major cause to this panic, and even the company’s attempts to restore confidence during its FQ4 earnings announcement seem to have hit a wall, as some investors still remain skeptical over the company’s ability to meet the market demand.
However, the analysts noted, “as data points from the foodchain and Apple Inc. (NASDAQ:AAPL)’s own retail channel begin to point to ever growing supply and remarkably robust demand in coming weeks, we suspect this argument will fade rapidly”. The analysts expect the company to deliver during the December quarter, which also coincides with the holiday season.
Another bear sentiment from investors and media is pinned on the company’s long-term future for its margins. According to reports, some investors are of the opinion that the company’s margin trajectory is faltering. The company issued a margin guidance for the coming quarter that fell below analyst expectations, and as always, this is never good news to investors.
This sign is indicative of pressure from market competition that forces tech companies to lower prices in order to compete on the same platform. However, this was not the case for Apple Inc. (NASDAQ:AAPL) when it launched its iPad mini. The company priced its new device at a premium to the similar devices in the market. Therefore, this suggests an increase in production costs.
Nonetheless, the analysts are optimistic that, in the next 2-3 quarters, the margins will strengthen again, eliminating this mindset. The analysts said, “this bear argument may persist into early 2013, but we think a steady rebound in margins in March and June quarters should support our view that this is a normal pattern for Apple product ramps”.
The third bearish sentiment is tied around the company’s long standing platform, iOS. Some investors believe that the company is not getting many new users of the platform, which depicts signs of stagnation. However, the report also notes that this sentiment does lack supporting data, as statistics showed that 66% of iOS users for the full year 2012, are new customers. The analysts added, “we suspect this bear argument will fade as this becomes more apparent and with a solid iPhone and iPad shipment number in the December quarter”.
The iPad mini has also received a fair share of criticism, being dubbed “a me too” product. As pressure from the likes of Google Inc. (NASDAQ:GOOG)’s Nexus 7 tablet and Amazon.com Inc. (NASDAQ:AMZN)’s Kindle fire tablet rendered the 9.7 inch iPad highly priced. Notwithstanding, the analysts discount this argument by pointing that Apple held 66% of the tablet market by June 30, as compared to 58% held in 2011.
The analysts said, “this argument should fade in the December quarter as it becomes apparent that the iPad mini is expanding the tablet TAM, compressing the market share momentum of other small form-factor tablets, and rapidly expanding the iPad installed base”.
Finally, some investors are very skeptical with regard to the recent management changes witnessed at the heart of Apple Inc. (NASDAQ:AAPL)’s leadership. Some investors are believed to be of the opinion that the management shake up represents an early warning sign. However, the report notes that these kinds of shake ups are normal for most companies and that they are often necessary when a new CEO takes the helm.
The analysts said, “this argument is hard to counter in the short-term and it will likely linger until Apple Inc. (NASDAQ:AAPL) posts numbers that make it irrelevant. As such, we suspect this will be a recurring bear theme into 2013 and until it is apparent that Apple’s momentum is unfazed by the changes”.
