Apple’s gross margins are the key takeaway from yesterday’s results, say analysts

While Wall Street may have been slightly disappointed by some of the numbers Apple reported yesterday, they should feel reassured by Apple stabilising and growing its gross margins, say Apple bulls – analysts who expect the stock price to rise.

Business Insider noted the above chart tweeted by Benedict Evans with the commentary:

Very stable long-term gross margins. Painful contrast to rest of the industry …

The sentiment was echoed by other Apple bears.

Katy Huberty at Morgan Stanley says Apple’s gross margin was the “highlight” of the quarter, and it “removes the margin bear case” […]

“Apple’s performance in the margin department was one of the best over the past couple of years relative to our estimates, driven by stronger-than-expected cost improvements and solid product quality,” said Brian White of Cantor Fitzgerald.

While some analysts expect pressure on margins as the iPhone 6 rolls out, this would not be unexpected: Apple’s costs tend to increase as it invests in the setup costs associated with launching new models, and fall again afterwards.