Apple: Insourcing Can Structurally Lift Gross Margins
Contributor since 2022 / 4636 Followers
Summary:
- 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.
praetorianphoto/E+ via Getty Images
Performance Assessment
Apple (NASDAQ:AAPL) (NEOE:AAPL:CA) has outperformed the S&P 500 (SPY) (SPX) (IVV) (VOO) since my initiating coverage on the stock:
Thesis
Recent developments have overall made me even more bullish on the stock, which is
Analyst’s Disclosure: I/we have a beneficial long position in the shares of AAPL, VOO either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.