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Apple's earnings spur rush by analysts to lower outlooks

Analysts react after the firm's disappointing first-quarter profit and forecast of lackluster revenue growth in the current quarter. Apple shares fall 12.4%.

January 24, 2013|By Chris O'Brien and Andrea Chang, Los Angeles Times
  • As its fortunes have climbed, it has become increasingly difficult for Apple to meet, much less exceed, investors’ and analysts’ sky-high expectations. Above, a customer tries out an iPad Mini at an Apple store in Hangzhou, China.
As its fortunes have climbed, it has become increasingly difficult for… (Long Wei, European Pressphoto…)

Apple Inc.'s disappointing earnings report left analysts scrambling to reduce their historically rosy outlook for the company as investors continued to flee the stock.

Apple shares fell sharply when trading opened Thursday, tumbling $63.51, or 12.4%, to $450.50 as investors reacted to the company's reduced outlook for growth and a quarterly earnings report that missed some expectations.

The drop came after a beating that Apple's stock took in after-hours trading Wednesday, when shares are much more thinly traded.

The stock closed Wednesday at $514.01, before the company's fiscal first-quarter earnings were released. Once the report that showed record revenue but flattening profit was out, the company's stock fell 10.6% in after-hours trading.

Apple appears to be getting hurt by its own success. As its fortunes have climbed, it has become increasingly difficult for the company to meet, much less exceed, investors' and analysts' sky-high expectations.

For the three months that ended in December, Apple said revenue increased 18% to a record $54.5 billion. Profit also set an all-time high but was up only slightly from the year-earlier quarter, rising to $13.08 billion, or $13.81 a share, from $13.06 billion, or $13.87.

Analysts also expressed disappointment that the company sold only 47.8 million iPhones during the quarter, short of the 50 million many had hoped for.

More troubling, though, was the company's projection that it would post $41 billion to $43 billion in revenue for the current quarter that ends in March. That compares with the $39.2 billion it posted for the same quarter last year.

Following Apple's earnings report, a slew of analysts rushed to lower their estimates for the Cupertino, Calif., company.

In a note to clients, BTIG research analyst Walter Piecyk said he was reducing his outlook for the company. Piecyk said analysts in general had been reducing the outlook for Apple's current fiscal year since last summer. And the latest guidance from Apple is likely to lead to further reductions and put the stock under pressure.

"The company's dire guidance for the March quarter is likely to accelerate the pace of those revisions," Piecyk said in a note to investors. "Even more startling is the company's own guidance for the March quarter. That is not a great way to achieve a higher multiple."

Topeka Capital's Brian White had held tight to his projection that Apple's stock would hit $1,111 this year even as it plunged in recent months. But after earnings this week, he finally decided to reduce his price target to $888.

Gene Munster, an analyst at Piper Jaffray, also lowered his price target for the company's stock to $767 from $875. Munster had cut that target from $910 just two weeks ago.

"We are buyers of Apple on the pullback following the company's December quarter earnings report based on our belief that street numbers will be adequately reset and investors will return to the stock once the potential of new products comes into focus over the next three to six months," Munster wrote. "We remain optimistic about shares of Apple."

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