“A couple of weeks ago, I applauded Apple (AAPL) for doing the right thing by using its buyback to cushion a fall in its shares after the latest earnings report. When Apple’s fiscal Q2 guidance did not impress, shares slid from $550 (and a high of $575) to under $495,” Bill Maurer writes for Seeking Alpha. “The news of Apple’s buyback inspired some confidence in the short-term, and shares quickly bounced back to $551. The rally didn’t last long, as a couple of analyst downgrades knocked down the stock, and Apple closed Tuesday at $522.”
“The fear about guidance was valid because current analyst estimates call for a small decline in Apple’s fiscal Q2 revenues over the prior year period. Investors have become concerned about Apple’s growth, and flat or declining revenues are a big issue,” Maurer writes. “The stock will have a hard time rallying and keeping a decent valuation without growth. In today’s market, names like Google (GOOG), Facebook (FB), and Tesla Motors (TSLA) keep rallying to new highs, because they have growth potential.”
“That’s why it is so important for Apple to deliver now. The company needs to come out with something new, and rather soon. Even if it is just a new iPad or larger screen iPhone, Apple cannot wait until September or October to start launching products. Yes, the China Mobile (CHL) deal will help, but it may not be enough,” Maurer writes. “Apple protected its stock when shares fell post-earnings by buying back $14 billion worth of stock. Now it is time for Apple to launch some new products and get the growth story back on track. Apple may need a launch in the next few months to meet current Q3 estimates. If not, Apple’s guidance will probably be weak again in April, and regardless of the Q2 numbers, the stock will drop again. If Apple can launch some new versions of current products, and maybe some completely new products as well, growth will return. That should get the stock moving again…”
Much more in the full article here.