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iPhone Causes Apple Plunge: What Wall Street Is Thinking (Update 1)

Updated from 8:13 a.m. EST to include comments from Morgan Stanley.

NEW YORK (TheStreet) -- Apple (AAPL - Get Report) shares dropped sharply in trading on Tuesday, following fiscal first-quarter results that missed some Wall Street estimates, and over concerns about revenue guidance for the upcoming quarter.

Apple reported fiscal first-quarter earnings of $14.50 a share on $57.5 billion in revenue, up 6% from a year earlier. Analysts surveyed by Thomson Reuters expected Apple to earn $14.07 a share on $57.45 billion in revenue. Gross margin was 37.9% during the quarter.

The company sold 51 million iPhones, compared to 47.8 million in the year-earlier quarter. Apple was supply-constrained on the iPhone 5s during the quarter, with CEO Timothy D. Cook noting the demand mix was much different than the company originally thought.

"And so the mix was stronger to the 5s, and it took us some amount of time in order to build the mix that customers were demanding," Cook said during an earnings conference call. "And as a result, we lost some sort of units for part of the quarter in North America and relative to the world, it took us the bulk of the quarter, almost all the quarter, to get the iPhone 5s into proper supply."

Apple shares were falling 7.5% to $509.06.

AAPL ChartAAPL data by YCharts

Apple said it sold 26 million iPads and 4.8 million Macs during the quarter.

For the fiscal second quarter, Apple said it expects revenue of between $42 billion and $44 billion, with margins between 37% and 38%, and operating expenses between $4.3 billion and $4.4 billion, with a 26.2% tax rate.

Following the report, analysts were concerned about the iPhone mix and whether the market was reaching maturation. There was also some optimism surrounding Apple's potential entry into the mobile payments market, though the negative sentiment outweighed that. Here's what a few analysts on Wall Street had to say about Apple's earnings report:

Oppenheimer analyst Ittai Kidron (Perform, No PT)

"We're downgrading Apple to Perform and removing our $560 PT. Apple delivered a solid Dec. qtr., but provided guidance showing new products already in supply/demand balance in most regions. We see Apple now entering a lull period (like the one seen in 1H-CY13) until its next new product cycle comes into view. Near-term expansion opportunities (current products) are mostly in emerging markets, but with competition tough (especially in China) and margins/ASPs at risk of moderation, we believe investors would be cautious. A larger screen iPhone and phablets are likely 2014 additions, but we see this as replacement focused with pressure mounting to deliver in a new product category where timing is uncertain. Overall, we see AAPL as range-bound through the summer."

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