Apple Reports Earnings This Afternoon: What has Investors Worried?

Michael Teague  |

Apple's (AAPL) recent troubles were exacerbated last week, with shares having broken beneath the $400 barrier for this first time since December of 2011. The stock has lost over $300 dollars in price since September of last year when it was perched at its all-time high of $702.

Furthermore, Apple currently seems more preoccupied at the moment with reshuffling or re-configuring its current lineup of products than it is with any game-changing new releases. The company’s most recent activity has been the release of the iPad Mini, as well as a promised upgrade and/or cheaper version of the iPhone 5 due out midway through the year.

Otherwise, investors and consumers have been left with almost no official indication of what sort of products the company may release over the next year, though rumors of iWatches, glasses, or a new television experience are never in shortage.

Even Apple’s genre-defining mobile products are suspected of weakening sales, especially after the company’s audio-chip supplier, Cirrus Logic (CRUS), released a preview of earnings last Wednesday that warned of a “decreased forecast for high-volume product”, leaving many to speculate that the only source for this could be a drop in sales of iPhones and iPads.

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Other pressure points for the company include what it should do with its $137 billion reserve of cash, and how it will deal with encroaching competition from Samsung, Blackberry (BBRY), and soon, others like Google (GOOG) and Amazon (AMZN).

A Thomson-Reuters poll has the company reporting earnings of $10.12 per share with revenue at $42.6 billion. Assuming the company meets these expectations, the revenue figure would still be an increase on the prior-year period of $3 billion. Furthermore, sales for the iPhone during the last quarter were up 29 percent on the prior year.

Unfortunately, it is not the company’s earnings that has investors worried, but rather its sales growth. That same period last year saw an 88 percent growth in sales of iPhone units. In contrast, tomorrow the company is expected to give its forecast for the rest of the year, on which analysts have already been cutting back.

Apple still beats the competition in terms of sales, which is a fact that would seem incongruous with the drubbing the company’s shares have been taking and all the bad press it receives. Still, some have been apprehensive about a perceived lack of innovation, seeing nowhere else for Apple to turn but cheaper re-iterations of its current line of tablets and smartphones, thereby lowering profit margins and undermining the company’s reputation for premium products.

The company will be thankful for upgrades it received on Monday from BGC and Avondale, with Collin Gillis of BGC noting that any positive news could send the stock back up to the $500 range rather quickly. The company closed Monday up nearly 2.1 percent to $398.67.

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