Apple Has Not Lost Its Shine, Whisper Numbers Coming in Above Consensus

By George Leong for Investment Contrarians

Apple Inc. (NASDAQ/AAPL) has been punished in the financial media and on Wall Street, having lost its edge. Trading above $705.00 in September 2012, the stock has snapped back to reality, recently declining to a two-week low of $419.00 on March 4, 2013.

At the current price, there are arguments on both sides regarding whether Apple is worth a gamble or if it is the beginning of a new downtrend below $400.00.

In my view, the business landscape for Apple has become much more competitive. You have “Android”-powered devices accounting for a large portion of the smartphone market. This is mainly thanks to the overwhelming success of Samsung Electronics Co. Ltd.’s “Galaxy” series of smartphones and tablets. I have both an “iPad” and a Galaxy phablet (a large smartphone with the capabilities of a tablet). I must admit after using the iPad for a few years, I actually find it much better than the Galaxy.

Yet the market is still mixed.

While the iPad remains the dominant tablet, Apple’s reign in the tablet sector is clearly in jeopardy; but in my view, until a better tablet surfaces, the company will continue to produce the top tablet.

Investment manager Ken Fisher increased his holdings of Apple by 58.12% at prices ranging from $420.05 to $549.03, with an average price of $467.05. (Source: “Ken Fisher Buys Apple Inc, American Express Co, Coinstar, Sells America Movil, Petrobras, Visa,” Forbes April 11, 2013.)

The chart of Apple below shows a bearish descending triangle. The $400.00 level is a key support level. Yet a good quarter could easily turn the tide and drive the share price higher, based on my technical analysis.

For investors, there may be a contrarian buy at this point. The reality is that Apple is far from dead, but at the same time, it really needs to add to its current arsenal of devices.

The “iPhone 5” needs a remodel to compete with Samsung’s “Galaxy 4,” which is challenging Apple in every area.

The speculation on the Street is that the next-generation iPhone, or “iPhone 5S,” will simply act as a bridge between the current iPhone5 and the expected launch of the “iPhone 6” in 2014. The iPhone 5S is widely expected to incorporate a few changes, but for a complete redesign, Apple users will have to wait for the iPhone 6.

Yet for Apple, the company will need to continue to deliver innovative products to keep ahead of the curve. By “curve,” I mean Samsung.

So until this happens, Apple could be under some pressure. But longer-term, I continue to like the prospects for the company.

The company reports its fiscal second quarter on April 23, and based on the whisper numbers, the earnings season could provide an upside surprise.

The whisper number for earnings is calling for the company to make $10.63 per diluted share, ahead of the current Thomson Financial consensus estimate of $10.13 per diluted share. (Source: WhisperNumber.com, last accessed April 11, 2013.)

So while many are calling for Apple to fall, I’m on the contrarian side and feel the stock will be a long-term winner—but you’ll need to ignore the short-term hurdles.