Apple's Stock Tumbles, But Earnings Report Could Change That

CUPERTINO, Calif. ( TheStreet) -- Apple ( AAPL) has had an eventful few weeks.

Hot on the heels of the tech company's big iPad launch, Apple dived back into dividends and reached $600 billion in market value for the first time. And then the shares took a headline-grabbing tumble.

Since hitting an all-time high of $644 on April 10, Apple's stock has slid more than 12%. Still, analysts have faith in the iPhone maker, which reports second-quarter results after the market close today.

Tim Cook, Apple's CEO

"The stock has meaningful upside potential from current levels," said Brian White, a senior analyst at Topeka Capital Markets, in a note. Apple, he added, is trading at just 9.1 times Topeka's earnings estimate for calendar year 2013, excluding cash. The analyst also eyed the rumored iPhone 5, Apple TV, iPad Mini and a relationship with China Mobile as potential growth catalysts.

Apple, however, recently received a rare downgrade amid concern that carriers may rein in their iPhone subsidies.

Not that Topeka's White is overly concerned. The analyst, who says Apple's falling share price is the result of profit taking after the stock rocketed by up to 50% this year, expects iPhones and iPads to drive decent second-quarter results.

"There is upside potential to our iPhone unit forecast of 29.6 million in the second quarter of fiscal 2012," he said. "For the iPad, we are projecting unit sales of 11.58 million -- our iPad forecast has modest upside potential and the 3 million new iPads sold in the first three days was much stronger than expected."

Sterne Agee analyst Shaw Wu echoes this. "Anticipate a strong quarter driven by iPhone and iPad," he said in a note. "Concerns over slowing iPhone and iPad momentum are overdone."

Apple sold a record 37 million iPhones during its recent fiscal first quarter, boosted by the holiday shopping season and October's iPhone 4S launch. The gadget giant sold 18.6 million iPhones during the second quarter of 2011.

During the fiscal first quarter, Apple sold 15.4 million iPads. The company sold 4.7 million iPads during the second quarter of last year.

TheStreet will be live-blogging Apple's second-quarter earnings, starting at 3.45PM ET:

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"Based on our supply-chain checks, we anticipate a sizeable EPS beat based on iPhone and iPad strength despite Macs likely coming in a little light," said Sterne Agee's Wu, who last raised his iPhone estimates in late March. "Since then, our follow-up work indicates there is still room for upside despite consensus estimates moving up a bit."

Wu raised his iPhone forecast to 29.5 million units from 28.2 million units last week, and kept his iPad estimate at 12.3 million units. Then analyst also raised his Apple gross margin estimate to 43.5% from 43.2%, citing a favorable mix shift towards the iPhone.

"We continue to believe that Apple is positioned to outperform in this tough macroeconomic environment with its defendable strategic and structural advantages and its vertical integration," Wu said.

Goldman Sachs ( GS) also expects a solid March quarter from Apple, recently raising the tech giant's price target from $700 to $750.

Apple shares, however, continued their slide today, slipping $6.50, or 1.1%, to $565.20.

Analysts surveyed by Thomson Reuters expect Apple to report second-quarter revenue of $36.8 billion and earnings of $10.04 a share, up from $24.67 billion and earnings of $6.40 a share in the prior year's quarter.

--Written by James Rogers in New York.

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