Analyst: Lower Margins Have Brought Apple Down to Earth

If there is one thing that analysts and investors are looking at more than Apple’s (NASDAQ:AAPL) capital distribution plan right now, its the company’s gross margin. Specifically, it’s how thin the ratio between the company’s gross profit and net sales has become over the past few quarters.

Is Apple now a once-in-a-decade buying opportunity? Click here to get your 24-page Ultimate Cheat Sheet to Apple’s Stock now!

In case you missed the party last night or need a refresher, here’s a quick breakdown of Apple’s results over the past few quarters:

Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012 Mar. 31, 2013 Jun. 30, 2012 (guidance)
Revenue($) in millions 39,032 34,960 35,833 54,521  43,600  33,500 to 35,500
Diluted EPS ($) 12.30 9.32 8.67 13.81  10.09 9.08**
Gross Margin (%) 47.4 42.8 40.0 38.6  37.5  36 to 37

*Mean Analyst Estimate

Apple has historically claimed such a tremendous share of the profits in its industry that it had no reasonable direction to go but down. This downward margin pressure is hardly surprising, although it is slightly concerning — and to BMO Capital Markets analyst Keith Bachman, it’s downright disappointing…

“Apple posted a solid Q in terms of units/revenues, but disappointed with gross margins at the low end of the range (37.5%),” the analyst wrote in a note seen by Benzinga. “We think the March Q results were also consistent with our longer-term concerns about Apple having to trade off revenue growth vs. margins.”

The analyst lowered his price target on the stock from $440 to $435 and downgraded it from Outperform to Market Perform.

“Moreover,” the analyst continued, “while the material increase in capital allocation is a positive, we think the challenges of 1) increased competitiveness in the smartphone market, which we believe will pressure ASPs and margins – will largely offset 2) improved capital allocation.”

At the moment, it seems the markets disagree.

EXCLUSIVE OFFER! Take Advantage of the Tax Relief 50% Off Sale for a Limited Time. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

Apple Inc. Stock Chart - AAPL Interactive Chart - Yahoo! Finance

Don’t Miss: Here’s Your Cheat Sheet to Apple’s Buyback Program.