This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Apple: Everything You Didn't Want to Believe May Be True

Stocks in this article: AAPL GOOG

NEW YORK ( TheStreet) -- To describe Apple (AAPL), I'm going to borrow some lyrics from Toby Keith. "I ain't as good as I once was/But I'm as good once as I ever was."

Apple's second-quarter earnings report seems to bear out Wall Street's growth concerns. The company had a phenomenal 2012, a year that was way beyond expectations, setting 2013 up to be remarkably difficult. CEO Tim Cook acknowledged as much on the earnings call. " W e acknowledge that our growth rate has slowed and our margins have decreased from the exceptionally high level we experienced in 2012," Cook said. That doesn't mean Apple's dead in the water, though.

UBS analyst Steven Milunovich wrote that Cook talked about new products and new product categories, but that they would be later than Wall Street analysts and the media were expecting, with launches in the fall and throughout 2014.

"Apple is ramping R&D and marketing in the June quarter, which may mean Sep announcement of the 5S and low-end phone," Milunovich wrote in his note. "We assume the Sep quarter will look much like the June quarter with Dec showing strong improvement." Milunovich rates shares "buy," but cut his price target to $500 from $560.

June guidance was exceptionally weak, much weaker than anyone on Wall Street thought. For the fiscal third-quarter, Apple expects revenue will be between $33.5 billion and $35.5 billion, with gross margins between 36% and 37%. Prior to the announcement, analysts polled by Thomson Reuters were expecting $38.2 billion in sales.

Competition is clearly affecting Apple, judging by the guidance. Cook acknowledged as much on the call, saying Samsung, married with Google (GOOG), was Apple's toughest competitor on the hardware side.

This demonstrates that Apple is seeing weaker year-over-year growth, and 2013 is essentially a lost year for Apple. Topeka Capital Markets analyst Brian White believes Apple "represents an attractive stock heading into a new product cycle in FY14." While this may be true, shareholders are getting antsy with the drastic sell-off in the stock, down more than 40% since the launch of the iPhone 5. The company assuaged some of those fears with a huge capital return program, giving back $100 billion to shareholders in the form of buybacks and dividends over the next three years.

That's extraordinarily generous, but it does show that Apple's cash hoard is outweighing its innovation and product pipeline right now, which is not something shareholders ever want to see, no matter how short-term in nature Apple might want to spin it. At the very least, it should buy Cook and his team time as Apple tries to restart the growth engine.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs