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Customers gather outside an Apple store before the release of iPhone 5 in Munich early September 21, 2012. (MICHAEL DALDER/REUTERS)
Customers gather outside an Apple store before the release of iPhone 5 in Munich early September 21, 2012. (MICHAEL DALDER/REUTERS)

Stock to watch: Rivals taking a bite out of Apple Add to ...

Apple Inc. (AAPL-Q)

Tuesday’s close: $504.77, up $4.77 (U.S.)

52-week trading range: $419.55 – $ 705.07 a share

Annual dividend: $10.60 a share for a yield of 2 per cent

Analyst’s ratings: There were 52 buys, 9 holds and 2 sells, according to Bloomberg data. Target prices ranged from $1,111 from Brian White of Topeka Capital Markets to $270 from Edward Zabitsky of ACI Research.

Recent history: Shares of the maker of the iPhone and iPad electronic devices have gained nearly 21 per cent [including dividends] over the past year, but it has been a wild ride. The stock shot up to its 52-week high in September as earnings and revenues grew, but plunged nearly 30 per cent on concerns of slower growth. Samsung Electronics Co.’s Galaxy smartphone surpassed Apple in U.S. sales momentarily late last year before the release of the iPhone 5. And there were worries about reports that Apple was cutting orders for certain iPhone components that could signal falling sales. Analysts have cut estimates ahead of first-quarter results to be released after the markets close on Wednesday. Analysts expect earnings per share to drop 2.7 per cent to $13.54 from a year earlier – the first drop since 2003, according to Bloomberg. Sales are expected to rise 18 per cent to $54.8-billion, the slowest growth since 2009.

Outlook: There will be a big focus on sales numbers for the iPhone and iPad, which together represent about 72 per cent of Apple’s revenues, as well as any signs of declining gross margin. “Apple is the victim of its own success,” said Lorne Steinberg, president of Lorne Steinberg Wealth Management Inc. “It is doing so amazingly well that no one can keep on growing revenues and earnings at this wild pace.”

There has also been little attention given to increasing competition from Microsoft Corp. with its new Windows 8 operating system, said Mr. Steinberg, who does not own Apple shares. (He has an eye on Apple because he owns shares of rival Hewlett-Packard Co.). Samsung is not tied to the Android operating system and has Windows 8 phones on its planning boards, while Hewlett-Packard and Dell Inc. are anxious to get into the tablet business with the new Microsoft operating system too, he said.

Sales of the iPhone, which account for 52 per cent of revenue, are forecast at around 48 million units in the latest quarter. Sales of the iPad are expected to be weaker as analysts have reduced estimates to about 18 to 19 million units from about 20 million as Apple has had problems getting some components, he added.

Apples shares have already taken a beating so “I don’t think there is a lot of downside to the stock from here,” said Mr. Steinberg. “I think a lot of the selling pressure is off the stock because it has fallen back to 10 to 10.5 times earnings. ... That is not expensive for a company that holds at ton of cash, pays a dividend and has no debt. ... However, if they forecast another weaker quarter of gross margin – in the short term, that could knock the stock down some more.”

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