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Apple Stock in 2013: Hang On For Another Wild Ride

By , Associate Editor, Money Morning • @DavidGZeiler -

Following the dizzying ups and downs of 2012, investors may be hoping for a little less drama from Apple stock in 2013.

While 2013 figures to be a very different year for Apple Inc. (Nasdaq: AAPL), don't plan on the ride getting much smoother.

With 2012 annual revenue at $156.5 billion and annual profit at almost $42 billion, Apple's biggest challenge heading into 2013 is figuring out how to add meaningful growth.

For example, when Apple reports earnings on Jan. 24, you won't see a repeat of last year's incredible December quarter year-over-year revenue growth of 73% and profit growth of 118%.

Numbers like that helped launch Apple stock on a tear from just over $400 at the start of the year to $544 by March 1.

But this January Apple would need quarterly revenue of $80 billion and profits of $28.5 billion to duplicate that rate of growth. Not even Apple can do that.

If Apple meets current analyst expectations for its Q1 2013, it will have revenue growth of 18% and a 4% decline in profit. That's not the sort of year-over year performance that lights a fire under a stock.

Indeed, Apple stock throughout 2013 will face difficult year-over-year comparisons as each quarter goes up against 2012's record numbers. AAPL is now officially a victim of its own success.

And any hiccups along the way will surely ding Apple stock in 2013, as we've seen repeatedly over the past three months.

Here's a look at what could go right - and wrong - for Apple stock in 2013.



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With Apple Stock Falling, Be Sure You Do This (Nasdaq: AAPL)

By , Associate Editor, Money Morning • @DavidGZeiler -

If Sir Isaac Newton were alive today he wouldn't have to sit under a tree to get knocked senseless by an errant fruit - with Apple stock falling, rising, then falling again, just being an Apple investor would do the trick.

Apple Inc. (Nasdaq: AAPL) stock started the year at $411, itself a 27% increase over the course of 2011. The stock rocketed to $626 in April, fell to $530 in May before zooming up to $702 in September.

And then it really got crazy.

Apple stock started falling, taking a rocky slide down to an intraday low of $505 on Nov. 16. Two weeks later, AAPL was back over $590 and threatening to cross the $600 threshold.

Until this week, when Apple stock went falling yet again. On Tuesday AAPL dropped $10 a share (about 1.7%), then Wednesday nosedived another $37.05, or 6.4%, to close at $538.79.

Apple stock today (Thursday) opened in negative territory, slipping quickly down to $518.63. Then it suddenly reversed sharply upward, reaching $550 by noon.

Analysts were left scratching their heads.

"Apple stock is significantly more volatile than its earnings and innovation stream," Daniel Ernst, analyst with Hudson Square Research, told Reuters. "And yet the wind blows slightly from the south instead of the east one particular morning, and the stock is down 6%."

"It makes no sense. There are lines around the block for their products all around the world," Ernst added. "No other company has that."

Why Apple Stock is Falling

Theories abound as to why Apple stock is falling.

This week's move most likely was triggered when AAPL stock made a "death cross" - that is, the 50-day moving average dropped below the 200-day moving average, typically a bad sign for a stock.

But there are a few other factors that could have turned off investors:

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The Apple Stock Drop: What You Need to Know (Nasdaq: AAPL)

By , Associate Editor, Money Morning • @DavidGZeiler -

As Apple Inc. (Nasdaq: AAPL) stock continues its seven-week tumble, investors want to know what is likely to happen next.

Since hitting an all-time high of $702.10 on Sept. 19, Apple stock plunged $155.04 --more than 22% to close at $547.06 on Friday.

Investors have gotten little help from Wall Street analysts, who have offered diametrically opposed opinions on where AAPL is headed.

Among the prominent bears is Doubleline Capital CEO Jeff Gundlach, who predicted on Thursday that Apple stock would continue all the way down to $425. He said that's about where AAPL was when it started its dramatic climb in January, and he expects it to return to those levels.

Gundlach is down on Apple because he thinks the Cupertino, CA-based company's new products are no longer cutting edge.

"I'm really struck by this mini iPad thing as if that's any kind of a product innovation," Gundlach told CNBC."Once you just start changing the size of your products, I really think you're not exactly innovating."

Meanwhile, some Apple bulls insisted the stock will not only bounce back, but eventually will reach beyond $1,000 a share.

Brian White, an analyst with Topeka Capital Markets, said in a note to clients on Thursday that he's keeping his $1,111 price target on AAPL.

"We believe that those investors that have missed the Apple rally over the past year are presented with a very attractive entry point heading into the strong holiday news season," White wrote.

So which story are Apple investors to believe?

To figure that out, let's take a closer look at what's been going on.

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How to Know When to Sell Apple Stock (Nasdaq: AAPL)

By , Associate Editor, Money Morning • @DavidGZeiler -

Trying to figure out when to sell Apple stock (Nasdaq: AAPL), particularly given its spectacular performance over the past several years, is a major dilemma.

If you're long on AAPL, you're no doubt trying to sort through a lot of conflicting signals.

With AAPL down about 16% from its high of $702.10 on Sept. 19 amid a wave of negative news, some financial pundits are calling a top and urging Apple investors to sell Apple stock.

Trouble is, they've done this many times before during Apple's long climb. Sometimes it's after AAPL hits a new high, and sometimes (like we're seeing now) it's after the stock dips in reaction to some bad news.

But investors who opted to sell Apple stock in years past lived to regret it.

Back in 2010, for example, when AAPL breached the $300 mark, plenty of bears urged shareholders to rush for the exits.

Any who followed that advice missed out on a 100% gain.

At the same time, Apple stock can't keep rising forever. No company can maintain the sort of exponential growth necessary to fuel the kind of gains Apple has enjoyed over the past few years.

But the big question is when this will happen. Now? Next quarter? Next year? 2015?

And as if that weren't enough to make an Apple investor's head spin, there's the added stress of volatility.

From late November to early April, AAPL soared $270, an astounding 75% increase in just four and a half months. Then it fell $100 in the next five weeks.

With turbulence like that, retail investors easily can get heartburn trying to figure out when to sell Apple stock.

That's why we put together some guidance.

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Apple iTunes Radio Service Doesn't Leave Pandora Any Hope

By , Associate Editor, Money Morning • @DavidGZeiler -

Fresh reports that a long-rumored Apple iTunes Radio Service will arrive in February have caused shares of Pandora Media Inc. (NYSE: P) to swoon over the past two days.

Yesterday the selloff was so abrupt it triggered two circuit breakers that briefly halted trading in Pandora stock. Shares closed at $8.20 yesterday (Thursday), down nearly 12%, and have edged lower today.

The Bloomberg News report yesterday afternoon indicated Apple Inc. (Nasdaq: AAPL) is very close to a deal with the major record labels that will enable it to launch a very similar ad-based music streaming service.

Fears of such a service, possibly called iTunes Radio, drew the quick and nasty negative reaction on Wall Street.

"If the Apple radio rumors are true, Pandora has every reason to be scared - terrified, even," wrote Tom Cheredar in a commentary for Venture Beat.

Here's why.

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Forget Q4: Apple (Nasdaq: AAPL) Earnings Must Deliver in December

By , Associate Editor, Money Morning • @DavidGZeiler -

Even though Apple Inc.'s (Nasdaq: AAPL) earnings for Q4 aren't yet out - they'll be announced after Thursday's market close - the company is much more concerned with beating last year's spectacular December quarter, the company's fiscal first quarter.

Apple's Q1 earnings last year blew past all expectations. Apple earned $13.87 per share - more than doubling the profit from the year-earlier quarter -- by selling a record 37 million iPhones and 11 million iPads.

And Apple is going to need the profits from every gadget it can sell if it hopes to top that benchmark.

That's why all eyes were focused on the long-anticipated iPad Mini yesterday (Tuesday), but the real story was the avalanche of product updates unleashed just in time to supercharge for its critical December quarter.

In addition to the Apple iPad Mini, the special event in San Jose, CA, included the surprise announcement of the fourth generation iPad, a revamp of the iMac and Mac Mini desktops, and a the upgrade of the 13-inch MacBook Pro laptop to a high-res Retina display.

"We're not taking our foot off the gas," said Apple CEO Tim Cook.

When taken together with the iPhone 5 launch and the upgrades to the iPod Touch and iPod Nano just last month, it adds up to an uncharacteristic bunching of product updates.

It means lots of fresh Apple gear in stores for the holidays, historically the company's biggest quarter of the year.

Why Apple (Nasdaq: AAPL) Needs Great Q1 Earnings

In a sense, Apple has become a victim of its own success.

The explosive growth of Apple earnings, driven by the explosive growth of iPhone sales (and that product's huge profit margins), has made huge earnings increases routine.

But Apple knows the tough comparisons to year-ago quarters will get Wall Street's attention.

And as Apple's growth rate slows, so will the rise of the stock.

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Apple iPad Mini Doesn't Need to Be a Cash Cow to Be a Winner

By , Associate Editor, Money Morning • @DavidGZeiler -

While it won't rake in iPhone-style profits that could drive Apple Inc. (Nasdaq: AAPL) stock to new heights, a smaller iPad - the iPad Mini - is a smart and necessary strategic move.

The Apple iPad Mini does not yet exist, but recent reports say its arrival is imminent.

According to Fortune, invitations to an Oct. 17 iPad Mini introduction event are expected to go out Oct. 10, with the product likely available to buy in early November.

That was buttressed by a The Wall Street Journal story two days later that reported Asian suppliers had "started mass production" of an iPad Mini with a 7.85-inch screen.

Instead of celebrating a fresh source of Apple profit, however, some on Wall Street aren't thrilled by a smaller iPad.

They're worried that iPad Mini will hurt AAPL's margins, which have risen steadily along with sales of the high-margin iPhone.

But this theory just shows how The Street is missing the big picture.

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Why Apple (Nasdaq: AAPL) Won't Ditch Controversial Foxconn

By , Associate Editor, Money Morning • @DavidGZeiler -

Apple Inc.'s (Nasdaq: AAPL) position as an iconic brand, as well as a Wall Street darling, doesn't mean its image stays squeaky clean.

The company suffered a PR headache this week when a worker riot broke out at one of the Chinese factories run by Foxconn, the company that assembles the majority of iPhones and iPads.

The riot, which involved about 2,000 workers, occurred late Sunday at a Foxconn factory in Taiyuan. Analysts attributed the riot at least in part to the same stressful working conditions that led to several suicides in 2010.

Complaints about long hours, low pay, and draconian management at Foxconn's many factories have persisted for years, and reflected negatively on the usually-lauded Apple.

Although Foxconn assembles devices for most of the world's top consumer electronics companies -- including Sony Corp. (NYSE ADR: SNY), Hewlett-Packard Company (NYSE: HPQ), Dell Inc. (Nasdaq: DELL), Cisco Systems Inc. (Nasdaq: CSCO), and Microsoft Corp. (Nasdaq: MSFT) -- whenever a worker crisis erupts, the focus is all on Apple.

The net result is that Apple - which just launched its biggest product of the year, the iPhone 5, this past weekend - gets tainted by association every time there's trouble at Foxconn.

Over the past several years, that's happened with increasing frequency.

"These workers must be treated with respect," New York-based watchdog group China Labor Watch said in a statement. "And both Apple and Foxconn, with billions of dollars in profits every year, have both a legal and ethical obligation to uphold the rights of these workers."

Clearly Apple would rather avoid these nasty surprises, but a complex combination of factors will keep it lashed to Foxconn for years to come.

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Apple iPhone 5 Now a Golden Goose for Verizon and AT&T

By , Associate Editor, Money Morning • @DavidGZeiler -

Since the debut of the iPhone in 2007, the profit parade has mostly been a one-way street - but after five years, the major wireless carriers finally figured out how to make money with the Apple iPhone 5.

That means another way for you to make money from the iPhone 5, without having to buy Apple Inc. (Nasdaq: AAPL) stock.

Apple has raked in billions while first AT&T Inc. (NYSE: T), and later Verizon Communications Inc. (NYSE: VZ), and Sprint Nextel Corp. (NYSE: S), had their margins slammed by the huge subsidies they sent to Cupertino.

But evolving consumer habits and the Apple iPhone 5's addition of LTE network technology will soon change that in a big way.

The carriers are hoping the much higher data transfer speeds of LTE - approximately 10 times faster than 3G - will coax iPhone 5 owners to use more data-heavy functions, particularly video.

"With these great networks coming on, [data] usage is going to go up. Revenues will go up," AT&T Chief Financial Officer John Stephens said at recent media and communications conference.

While the carriers will still have to fork over the same fat subsidies to Apple they always have, the new data equation means they'll make the money back much more quickly. And that will translate into bigger profits.

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