Apple’s Earlier Than Expected Black Friday Deals Good Strategy

Image via Flickr/ Joakim Jardenberg

As Wall Street Insanity reported earlier, US retailers are expected to push the overdrive button this holiday season in view of the expected slip in sales during the period. A report from Morgan Stanley points out that not only will this holiday season have six fewer days compared with the year-ago season, but consumers will also shift their focus to big-ticket items, eschewing the typical holiday picks. In light of this dim outlook, a slew of retailers have announced early holiday deals, including Walmart, Target, Macy’s, among others.

Gotta Be Mobile, a firm that has spent the last seven years covering Black Friday deals and analyzing trends and sales, argues that Apple’s (NASDAQ:AAPL) Black Friday deals will start way ahead of the day itself. Black Friday, which is the day after Thanksgiving, will be on November 29. The Gotta Be Mobile team projects that some of the deals which will kick off ahead of November 29 including a $41 discount on the iPad Air, pushing the price down to $458 for the 16 GB model. The team also expects discounts of $21 on the iPod Touch to come in the form of store gift cards from third-party retailers rather than from Apple.

Gotta Be Mobile contends that the wild card this season will be deals on the iPhone 5s and iPhone 5c. Already, Target (NYSE:TGT) has confirmed that it will offer deals on the iPhone 5s, iPad Air and iPad Mini. The retailer is offering $50 off the iPhone 5s as well as an instant gift card.

Deals Will Maintain Recent Momentum

Admittedly, deals on the iPhone 5s and iPhone 5c will fuel sales momentum. Despite the fact that the iPhone 5s and iPhone 5c were unveiled toward the tail end of the third quarter, they contributed notably to Apple’s third quarter market share. During the third quarter, the Cupertino based bigwig’s US market share came in at 40.6 percent, having increased from 39.9 percent in the year-ago quarter. This gain was recorded amid slips from other sector players such as Android, which lost 0.2 percentage points to come in at 51.8 percent. BlackBerry (NASDAQ:BBRY) was the biggest loser, having slipped from 4.4 percent in the year-ago quarter to 3.8 percent during the third quarter. Competitive deals from Apple should serve to maintain the recent momentum and rope in new costumers.

Investors’ Silver Lining

For the past consecutive three quarters, Apple’s margins have slipped, coming in at 37 percent in the third quarter, down from 40 percent in the year-ago quarter. As is the case, investors have borne the brunt of this bearish run. However, abatement could be on the horizon. The expected deals present an opportunity to not only maintain a leash on current customers, but to also rope in new ones. This strategy presents the perfect backdrop for a rebound narrative.

Takeaway

While the prospect of holiday deals remains engaging, thinning margins are undoubtedly a huge concern at a time when rivals like Samsung are stepping up the competition. In addition to holiday deals, Apple needs to present a long-term solution to its thinning margins.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted