Apple CEO Tim Cook speaks during an Apple event as he introduces the new iPad as an image the device is projected on screen in San Francisco, California March 7, 2012.ROBERT GALBRAITH
Apple Inc. shares have fallen 13 per cent from their record high in what has been a drawn-out losing streak. On Tuesday afternoon, after markets close, investors will at last find out if this selloff has been justified when the iPad and iPhone maker releases its quarterly results.
According to Bloomberg News, analysts are expecting earnings of $10.03 (U.S.) a share – which looks like a fairly easy hurdle to clear: While that implies a gain of 85 per cent over last year, it would mark a substantial decline from the previous quarter when Apple romped past estimates with earnings of $13.87 a share.
Join us as technology reporter Omar El Akkad reports live from the earnings call.
Regardless of how this earnings drama unfolds, it seems clear that the recent correction in Apple's share price should at least challenge some of the more bullish opinions on the stock. For the most part, analysts have stood by the stock during the selloff, with some even raising their target prices. Right now, the average target stands at $697, up about $120 since Apple's first-quarter results were released in January.
These bullish forecasts are simple to summarize: Apple is a dominant player in the smartphone and tablet space, its customer loyalty is something to behold and the shares trade at just 12.6-times estimated earnings (which is cheap for a fast-growing company).
But the 13 per cent correction in the share price suggests that Apple might be more vulnerable than a lot of bullish observers will let on. And this vulnerability comes not from the quality of Apple products, but rather from the response from carriers, which are keen to lower subsidies given to consumers for upgrading phones.
In AT&T Inc.'s quarterly results, released on Tuesday morning, the telecom giant reported that iPhone activations rose to 4.3 million in the first quarter, up from 3.6 million last year. However, the number of activations was down sharply from 7.6 million in the fourth quarter.
Admittedly, that fourth-quarter result is skewed by holiday spending and a spike in activations that followed the introduction of the latest version of the iPhone. Plus, AT&T is just one carrier in one country. Still, it's enough to get people thinking – and thinking is rarely good for a high-flying, momentum-charged stock.
David Berman