NEW YORK ( TheStreet) -- Apple's ( AAPL) first-quarter earnings report failed to live up to Wall Street's expectations, with lower gross margins and a change in guidance. This doesn't mean it's no longer a great company. Right now, it's just not a great stock. Apple generated revenue of $54.5 billion in its fiscal first quarter, earning $13.81 per share. Analysts polled by Thomson Reuters were looking for $54.73 billion in revenue, and earnings of $13.47 per share. Gross margin dipped significantly year-over-year, coming in at 38.6%, compared to 44.7% a year ago. Much of the gross margin concerns can be attributed to iPad mini sales, which have a significantly lower price point and margin than the full-sized iPad. Citi analyst Glenn Yeung noted that the iPad mini's also "hampering corporate growth in the process." In its forward guidance, Apple said gross margin would be between 37.5% and 38.5% for the March quarter. Right now, there's little Apple can do or say outside of a new product that will assuage investors' fears over slowing growth, despite the record results. On the conference call, Piper Jaffray analyst Gene Munster asked about Apple's plans for the living room. CEO Tim Cook avoided talking about new products, but did hint at what's in the pipeline when talking about the Apple TV set top box. "I have said in the past this is an area of intense interest for us, and it remains that, and I tend to believe that there is a lot we can contribute in this space and so we continue to pull the string and see where it leads us," he said. While many expect Apple to eventually release a television set or something similar, investors don't care right now. The focus is on the iPhone, the iPad, and the fact that growth appears to be weakening in the handset market, Yeung noted in his research report. "And while we have little doubt that Apple will introduce new product to regain share (low-end iPhone), their disproportionate share of global handset profit seems at risk," Yeung wrote. He rates Apple "neutral," lowering his price target to $500 from $575. Doubleline Capital's Jeff Gundlach, who in the past has said Apple would go back to $425, believes Apple has a lot of work to do. "'I think this is really a broken company that is over-owned," Gundlach told CNBC's Fast Money. Goldman Sachs analyst Bill Shope, in a note, said that the results were "a tough setback, but the story is not broken." Shope cut Apple's price target to $660 from $760, but reiterated his Conviction List Buy rating going forward.
Sentiment has changed drastically from most of 2012, when Apple could seemingly do no wrong. The world was in love with Apple, with its products dazzling the media, analysts and consumers alike. Now, just consumers appear to be dazzled, judging by the 47.8 million iPhones and 22.9 million iPads sold during the quarter. Apple does not break out iPhone sales by model, but noted that the iPhone 5 was in good supply, while the iPhone 4 was supply constrained (huh?). Wall Street wants more, and the media's not impressed, despite having little, if anything else, that comes close to Apple's quality and innovation. Amazon's ( AMZN) hardware is suspect at best, with its Kindle Fire lineup of tablets. Google ( GOOG) can't make enough Nexus tablets to really make a dent. Android holds a dominant market share in smartphone sales, though much of that is due to Samsung, not Google itself. Microsoft ( MSFT) is getting into hardware, and sales of the Surface RT tablet have been "modest." Apple has failed to live up to the hype surrounding the company, partly due to its own lofty expectations, and partly due to the outside world. Right now, it seems as if all hope is lost for Apple. Shareholders, though, would be wise to consider that the second half of 2013 may wind up being better than the first, notes Morgan Stanley's Katy Huberty. Huberty, one of the most respected Apple analysts on Wall Street, removed Apple from Morgan Stanley's Best Ideas list, but noted that catalysts will start to appear in the summer of 2013. These include "a lower priced
iPhone, similar to iPad Mini, 2) new iPads, including iPad Mini with Retina Display around mid-year, 3) expanded carrier partnerships with T-Mobile in the US, NTT Docomo in Japan, and/or China Mobile in 2H13/2014." Apple could also increase its share repurchase program, with Huberty noting that every $5 billion lowers the share count by 1%. It was recently reported that Cook met with China Mobile ( CHL) Chairman Xi Guohua to discuss "matters of cooperation." A confidentiality agreement, however, was signed, so details have not yet been revealed. If one, or some, of these catalysts happen later in 2013, Apple will be able to get its "mojo" back, and the stock will begin to appreciate. The first nine months of 2012 were beyond incredible, with the stock gaining nearly 70%, then seemingly falling off a cliff. To me, this is a sign of a broken stock, not a broken company. Apple will again have its day in the sun. Just not right now. Interested in more on Apple? See TheStreet Ratings' report card for this stock. -- Written by Chris Ciaccia in New York >Contact by Email. Follow @Commodity_Bull