Analyst: Apple Gross Margins Ready to Climb

Apple’s bottom line is already healthy, and it may be ready to start improving even more, according to Gleacher & Company analyst Brian Marshall. Part of that boost will likely come from the end of Apple’s free iPhone 4 bumper program.

“If we are correct in our assessment that ‘antenna-gate’ is behind us and the bumper give-away will cease soon, Apple’s gross margin will automatically improve 100bps assuming all else equal due to the US$175 million revenue deferral reversal,” Mr. Marshall said.

Concerns over issues related to iPhone 4 signal strength loss when the device is held so the lower left corner is covered have been on the minds of some investors, and ultimately led to the media dubbing the issue “antenna-gate.” Apple was initially quiet about potential antenna problems, but ultimately held a special news conference to address concerns and to announce that it would be offering iPhone 4 owners free cases to help prevent signal loss.

Looking forward, Mr. Marshall expects Apple will show strong Mac sales during its September quarter when the company traditionally sees a back-to-school upswing. “We believe sales will continue to be strong for the September quarter as Apple gains market share from its traditional PC competitors, which are currently seeing a slow-down,” he said.

Mr. Marshall added that current Mac sales indicate that the iPad isn’t eating into other Apple product sales as some investors had feared would happen.

While he sees positive momentum for the Mac, iPad, iPhone and iPod, Mr. Marshall doesn’t see any significant improvements for Apple TV — at least not yet. “Apple seems to launch revolutionary products on a three-year cycle (iPod ramp in 2004, iPhone in 2007 and iPad in 2010),” Mr. Marshall said. “In our view, the living room will be revolutionized (2013?) by Apple with a better content viewing experience. For now, we will have to be satisfied with Apple TV.”

Mr. Marshall is maintaining his “Buy” rating and $345 target price for Apple’s stock. Apple is currently trading at $274.44, down 2.20 (-0.88%).