Is a Bruised Apple Ripe for a Sell-Off?

Apple (NASDAQ:AAPL) shares have been declining steadily over the past few weeks on fears that the stock has ventured into dreaded bubble territory and is overdue for a strong pullback. Shares fell more than 2 percent on Tuesday morning in their fifth straight day of losses leading up to the tech giant’s earnings report due after markets close today. Many are questioning whether the world’s most valuable company is losing steam.

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Investors are re-evaluating their positions and cashing in some holdings ahead of Apple’s second-quarter earnings on April 24. The decision could stem from a string of issues plaguing the technology giant, including major legal challenges across several continents, the Foxconn fiasco, increasing competition from Google’s (NASDAQ:GOOG) Android, and confusion on the Street over what its next product will look like.

It’s not so far fetched for investors to show any amount of caution given that Apple’s shares surged nearly 60 percent to a high of $644 this year. Any sign of trouble in the earnings report may prompt further profit-taking. According to Capital Advisors Growth Fund, any disappointment in Apple could lead to a significant sell-off in the short term. Last October, Apple shares fell 7 percent when the company missed Wall Street expectations for the first time in years.

But should investors choose to pull out of Apple, many believe they will eventually return. Forty-five out of 54 Wall Street investment banking analysts still have “Buy” or “Strong Buy” ratings on the stock based on strong iPhone and iPad sales and new products expected to be revealed later this year, including a TV and a new 4G iPhone. They believe that Apple will reveal a bumper quarter. Analysts attribute the recent sell-off to a combination of pre-earnings caution and profit-taking, and a string of sell orders that was triggered as the shares dropped.

The majority of Wall Street analysts expect Apple to hit the $675 mark in the next 12 months, with at least two analysts predicting the stock will reach over $1000 despite the sell-off.

Apple depends on strong iPhone and iPad sales, and any dissatisfaction with the numbers could weigh heavily on its shares. But Apple is expected to present a positive earnings report. The technology giant is estimated to have sold between 30 million and 35 million iPhones and roughly 13 million iPads in the second quarter. Over half of Apple’s first-quarter revenue was from the sale of 37.04 million iPhone units, causing investors to believe that there was no slowing down the world’s most popular company.

Despite analysts’ current sentiments, the release of new products later this year will fuel growth for Apple. It will take a lot more than minor setbacks to slow down the technology giant.