Tough road ahead for Apple Inc as it would need to revive itself after it’s margin fell

Boston, MA 02/12/2013 (wallstreetpr) – The margins of profit of Apple Inc (NASDAQ:AAPL) have dipped to a new low for the first time after the launch of iPhone in 2007. This steep fall is primarily due to the price reduction to overcome competition and failure to launch further innovative products.

The dip in margins has resulted in a steep slide of 33 percent in Apple Inc (NASDAQ:AAPL) share price from the peak price of $705.07 that ruled on Sept. 21 last year.  Standard & Poor’s 500 Index for the same period has rated the stock of company as the worst performing.

 The slide in gross margin has continued due to the launch of iPad mini and certain other higher priced products as also the lowering of the prevailing prices of the existing products. It is believed that Apple Inc (NASDAQ:AAPL) shares will continue to experience pressure unless the company comes out with a new path-breaking product with appropriate pricing.

Another cause of concern is the gradually dipping sales of iPhone that constitutes 56 percent of the company’s total sales revenue. Competitors are invading the market with economically priced feature-rich smartphones as also tablets using Google Inc.’s Android software.

The Apple-branded watch with incredible features is being recognized as one product that could possibly arrest the decline in profit margins. Apple Inc (NASDAQ:AAPL) has the potential to sell these watches in a massive way resulting in about 50 percent margin. This could be double the margin the company might earn when compared with marketing either a television or some low-priced phones.

Apple Inc (NASDAQ:AAPL) is reportedly exploiting the Chinese market that is price-conscious. New products like iPad mini are being priced lower that will further erode the profit margins.

Gross profit margin of Apple on iPhones, Macs , iPads and its other existing products is projected to drop in fiscal 2013 as per the company’s report of Jan. 24 filed with the U.S. Securities and Exchange Commission.

A television and an economically-priced iPhone that Apple plan to launch in 2013 will further narrow the profit margins – according to Morgan. Apple however is optimistic and claims it has many fabulous products lined up.

Apple Inc (NASDAQ:AAPL) may think of a revised payments system that would help it obtain an extra slice on all its products sold that might otherwise enrich credit-card firms. Apple Inc (NASDAQ:AAPL) may also bring into the market additionally loaded configurations of its present line of products.

As opposed to its earlier market domination with premium prices, Apple Inc (NASDAQ:AAPL) is trading at a whopping discount of 28 percent. This is based on the price-earnings parameter of Standard & Poor’s 500 Index – as per data Bloomberg has compiled.

With revenue estimated to increase 17 percent amounting to $182.9 billion during the current fiscal, the company’s idea is to divert investors’ attention to dollar profit and play down the actual profit margins.

The growth prospects appear rosy and indicate that Apple Inc (NASDAQ:AAPL) may have annual sales revenue of $400 billion by the year 2020.  Apple Inc (NASDAQ:AAPL) will be able to garner more dollars profits – even though profit margins may drop.

The shares of Apple Inc (NASDAQ:AAPL) were up by 1.04% to close at $479.93.

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).

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