Apple's Earnings Could Start a Turnaround (Update 1)

Updated from 6:30 a.m. EST to provide analyst comments in the eighth paragraph.

NEW YORK ( TheStreet) -- To say Apple ( AAPL) has had a rough go of it as of late would be an understatement. The company's third-quarter earnings may just show that the company is poised to a turn a corner, as investors, journalists and consumers alike wait for "one more thing."

Apple's share price has continued to underperform the broader averages, falling 19.6% year-to-date, compared to an 18.8% gain in the S&P 500. Apple was once the darling of Wall Street, as it could seemingly do no wrong, selling more iPhones and iPads than anyone thought imaginable. Now, the perception and reality on Apple has changed, but the company's fiscal third-quarter earnings report could start to change all that.

Though he reduced fiscal third-quarter estimates going into the report, Topeka Capital Markets analyst Brian White believes the attention is starting to shift in a positive way for Apple, as investors start to look toward next year.

"With Apple on the verge of what we believe will be a major product cycle over the next 12-18 months and the stock trading at an anemic 6x CY14 P/E multiple (ex-cash), we believe it would be shortsighted to place too much emphasis on the Company's near-term financial performance," White wrote in his report. "In fact, we remain confident that Apple is on track to meet the three phases for a sustainable stock recovery that we first outlined in March."

White now expects Apple to earn $7.37 per share on $35.28 billion in revenue for the quarter, down from $7.45 and $36.52 billion, respectively.

Analysts surveyed by Thomson Reuters expect Apple to report earnings of $7.32 per share on $35.01 billion in revenue for the quarter ended June 30. For Apple's fourth-quarter, analysts surveyed are expecting $7.95 per share in earnings on $37.08 billion in sales.

Much of the concern has been due to the iPhone growth slowing in recent months. It's still the top product for Apple, generating more than half of Apple's revenue last quarter, but the smartphone market itself has matured. While Apple does not reveal products until they are officially announced, many are expecting Apple to announce a lower-end iPhone to try and take back some of the market share Samsung and Google ( GOOG) own.

Citi analyst Glen Yeung, who rates Apple "neutral" with a $430 price target, believes heavy iPhone 4S sales could hurt Apple's ability to meet or beat top line estimates. "In light of a mix shift toward lower-end iPhone 4S and relatively weak iPad sales, we see risk that Apple's 3Q13 revenues/earnings could fall below the mid-point of their $33.5B-$35.5B revenue (consensus $35.1B, Citi $34.5B) and implied $6.66-$7.42 EPS guidance (consensus $7.31, Citi $7.09)," Yeung wrote in the note.

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