This Analyst Takes a Last Minute Stab at Apple

Apple (NASDAQ:AAPL) stock was up about 1.77 percent in afternoon trading, partially erasing losses accumulated at the end of the last week. At a closing price of $398.67 per share on Monday, the stock was about 52.5 percent away from the mean analyst price target of $607.96, and 31.7 percent away from the downwardly-revised price target set by analysts at FBR Capital.

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Analysts at the investment bank reduced their price target on the stock on Monday evening after the markets closed. The firm cut its fiscal second-quarter revenue estimate from $41.9 to $40.8 billion. This compares against the mean revenue estimate of about $42.7 billion. FBR reduced its earnings forecast from $9.75 to $9.42 per share, which compares against the mean forecast of $10.13. The analyst maintains his Outperform rating on the stock.

“Execution has been plagued by operational missteps and a steady stream of reported production cuts,” said an analyst at the firm in the note, seen by StreetInsider. If the earnings report contains evidence that the reported production cuts are real, then all of a sudden those bearish estimates could look pretty accurate. The analyst expects the company to report an operating margin of 28.8 percent, down from a previous estimate of 29.1 percent.

The analyst suggests that Apple can drive away the bears by doing a number of things. First, and perhaps foremost, it could secure China Mobile (NYSE:CHL) as a sales channel. Apple has historically claimed about 60 percent of its revenue from international sales, and strength in overseas developing markets will be critical. Second, it could raise the dividend. Third, it could finally launch that new product everybody has been waiting for.

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Here’s a quick breakdown of Apple’s past performance and analyst expectations for today’s release:

Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012 Mar. 31, 2013 (mean estimate)
Revenue ($) in millions 39,032 34,960 35,833 54,521 42,680
Diluted EPS ($) 12.30 9.32 8.67 13.81 10.13
Gross Margin (%) 47.4 42.8 40.0 38.6 37.5 to 38.5*

*Apple guidance

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