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Apple's iPhone 6 Gross Margins Could Contract, Bank of America Says

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Shares of Apple (NASDAQ: AAPL) are not participating in Friday's rally following some bearish comments from Bank of America.

Analyst Toni Sacconaghi said it is possible Apple may experience “material gross margin erosion” for iPhone 6. It is likely that the production costs and materials for iPhone 6 will be “materially higher,” specifically the potentially larger screen and expensive battery.

For a 4.7 inch screen, gross margins could contract by ~400-500bp versus the iPhone 5/5S, Sacconaghi said.

To offset gross margin contraction, Apple may need to raise the iPhone price or use trade-ins as a way to possibly lower the price of iPhone 6.

Shares of Apple are flat in Friday's trading after bumping into the critical $550 level earlier this week.

Posted-In: Bank of America Toni SacconaghiAnalyst Color Analyst Ratings

 

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