Our bullish thesis on Apple had been predicated on the expectation for gross margin (GM) expansion driven by the 5s cycle," said Um in his note, according to Street Insider. "While we still have conviction in the gross margin thesis (and the potential for iPad/iPhone unit upside), we believe this may be largely embedded into the valuation.
Wireless operators have been offering generous subsidies of ~$400 per smartphone, getting the price to consumers to ~$250 in an effort to drive increased smartphone penetration
Um's concerns include:
●Gross margin coming under pressure later this year with the iPhone 6 cycle;
●Limited amount of market opportunity for existing product segments Apple participates in; and
●A shift in the balance of power from handset vendors back to wireless providers
The bank has not changed in valuation range of $536 to $581 Um does see Apple's stock benefitting from an iWatch, iBeacons, an iPhone 6, and a new bigger dividend/buyback plan.
via Business Insider