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The past few days have yielded a bit of bad news for Apple (NASDAQ: AAPL ) investors. First, Citigroup analyst Glen Yeung said interest in the iPhone 5 and iPads may be slowing, and then three analysts cut their outlook on Apple, with a Berenberg Bank analyst dropping the company from a buy to "sell."
Yeung's bearish approach to Apple comes from his research into component orders for the iPad and iPhone 5. In an investors' note he said, "While production does not directly translate to sales (for example, we estimate Apple finished 1Q13 (Dec) with [around] 10M iPhone units in inventory), we suspect this is an indication of softer demand for iPhone 5 and iPhone 4S."
Yeung lowered his iPhone 5 estimates for the current quarter from 35 million to 34 million and said that component cutbacks have more to do with waning demand for the product than from anticipation of an iPhone 5S this summer. As for the Apple's tablets, Yeung dropped current-quarter sales estimates down by 1 million for both the iPad and iPad Mini, and lowered each by 300,000 units for the June quarter.
When analysts talk about component cutbacks, that doesn't always translate into less sales for a company, though it can hurt a company's stock price. Maybe that's why last month, when talk about iPhone component cutbacks surfaced, Apple CEO Tim Cook said, "Even if a particular data point were factual, it would be impossible to interpret the data point for what it means to our overall business."
Buy high, sell low
Back in September, Apple's stock was sitting just over $700 and many analysts still had buy ratings for the stock, but over the past few days three analysts have cut their outlooks for Apple. Among them is Berenberg Bank analyst Adnaan Ahmad, who now recommends selling Apple. He wrote, "Today, we downgrade Samsung and Apple to Sell. The smartphone investment of the past three years is now a smartphone trade."
He went on to say that he believe Apple's margins are going to shrink over time, with the iPhone's gross margins dropping from about 45%-50% down to 35% over the next three years. Ahmad predicts Apple's stock eventually falling down to the $360 range.
The big question
Apple investors have surely been keeping a close eye on the company's news over the past few months, as the stock has been dropping. The question is whether analysts who are predicting lower sales estimates, component cutbacks, and further stock price drops are correct.
One important thing investors need to see from Apple is its continued creation of products that shatter old markets and create new ones. As the iPod, iPhone, and iPad transformed the music industry, phones, and computers, respectively, investors shouldn't forget that Apple could still release rumored products like an iTV or iWatch that could bring in new revenue streams for the company. Investors need to watch iPad and iPhone sales closely over the next several quarters, as well as a possible iPhone 5 launch on China Mobile. But what they really need to see is Apple release a new product that taps into the company's innovative core and builds the stock price back up. Consumers are always on the look out for the next big thing, and it looks like investors are now waiting for the same from Apple.
There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.