Concerns over reiterated forecasts in Apple's 10-K filing 'overdone'Reaction to the gross margins forecast in Apple's annual 10-K filing this week has been unnecessary, as the numbers are no different than those presented earlier this month during the company's quarterly earnings call, Wall Street analysts have noted.
Shaw Wu with Kaufman Bros. said in a note to investors Thursday that some have incorrectly interpreted the information from Apple's 10-K filing as new guidance. He noted that the information is consistent with what the company said in its most recent earnings call, and in almost every annual 10-K filing about the upcoming fiscal year.
"Keep in mind, SEC filings are written by lawyers and tend to be conservative and cautious, as this is the most prudent thing to do from a legal standpoint," Wu wrote. He has recommended that investors take advantage of a potential share weakness.
Wu also noted that investors who may have become fixated on Apple's cautious gross margin projections would have passed on a "significant investment opportunity" the last 5 to 7 years.
He also said that trends could work to the company's benefit in the future, as the economies of scale on newer products like the iPhone 4, iPad and MacBook Air improve. He said checks with supply chains indicate that Apple is looking to have another display and touchscreen supplier in the first half of 2011, which would lead to lower costs per unit.
Mike Abramsky of RBC Capital Markets also issued a note to investors on Thursday downplaying the significance of the 10-K filing. Both he and Wu characterized the concerns over gross margins as "overdone."
"In the 10-K, Apple reiterated (not revised) its prior [first quarter] guidance for 36% gross margins," Abramsky wrote. "The disclosure is not unusual — Apple has reiterated its gross margin in its 10-K for several years."
Abramsky also sees iPhone 4 gross margins improving with scale. In addition, he too sees the situation as a buying opportunity for investors.
Apple on Wednesday issued its annual 10-K filing, in which it reiterated earlier statements that new products like the iPad and MacBook Air have been priced aggressively. As a result, the Cupertino, Calif., company has said that those products will likely drive down its gross margins in fiscal year 2011.
However, some media outlets portrayed the information, previously stated in Apple's quarterly earnings call on Oct. 18, as new information. As a result, shares of AAPL were off by about 1 percent Thursday in pre-market trading.
On Topic: Investor
- Apple CEO Tim Cook doubled pay to $9.2M in 2014, Angela Ahrendts led execs with $73.3M
- Apple board member Millard Drexler to retire in March, replacement unknown
- Morgan Stanley sees Apple's strong holiday sales continuing into 2015
- RBC raises Apple price target to $123, cites higher than expected iPhone 6 demand
- Shares of Apple dip more than 2% following downgrade from Japanese bank