Analysts continue to express their concerns for Apple’s (NASDAQ:AAPL) future profitability even as the iPhone maker’s stock begins to etch out gains on the stock chart once more, surpassing the important psychological and technological benchmark known as the 50-day simple moving average last week. Hitting that level was an important step for the stock, even though it is still trading around that average, as it gave analysts a shard of evidence that shares may have finally reached bottom after their six-month decline.
Oppenheimer analyst Ittai Kidron lowered his price target for shares of Apple on Tuesday from $600 to $550, dampening near-term expectations. As the rumored release date for the company’s next version of its flagship smartphone — named the iPhone 5S if analyst speculation is correct — nears, Kidron argued that customers will increasingly hold off purchasing new phones in anticipation of the next refresh. This change to purchasing patterns will likely hurt the company over the short term, as the lower sales figures will hurt its financials.
“Like spring training, the national pastime of predicting potential iPhone/iPad release dates is picking up steam and increasingly mid-year focused,” wrote Kidron in a research note seen by StreetInsider. “Nothing has substantiated, but as news flows, consumers will likely pause purchases awaiting the update. We see risk to consensus and are lowering our March/June estimates while raising Sept.”
The firm cut its expectations for the company’s fiscal 2013 earnings per share from $45.22 to $44.38 and lowered estimates for its fiscal 2014 earnings per share from $50.20 to $49.77.
While Oppenheimer’s expectations for lost iPhone sale were enough to prompt cuts to Apple’s earnings for a two-year period, the analyst noted that much of the downside has already been priced into the stock; that’s the good news. “Much of the revision appears built into investor expectations, and we don’t see much downside pressure from a potential June miss,” he wrote. “However, we also don’t see much of a [near-term] positive catalyst until we get closer to the product cycle or get more clarity on Apple’s cash intentions.”
Topeka Capital Management’s Brian White has also singled out a redistribution its cash by Apple, in the form of a dividend boost or a special dividend, as a potential catalyst for the stock’s recovery.
Kidron’s concerns were not enough to lower his firm’s Outperform investment rating on the stock as he is still confident that Apple’s long term fundamentals will eventually lead to more significant gains on the stock chart.
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