Apple investors brace for more turbulence

Wed Apr 18, 2012 1:35pm EDT
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By Poornima Gupta

SAN FRANCISCO (Reuters) - Apple Inc's results will be dissected more closely than ever next week, after a share swoon raised concerns on Wall Street that the stock's gravity-defying rally may be losing steam.

Five straight days of stock losses for the world's most valuable company sparked fears it had ventured into dreaded bubble territory and was overdue for a strong pullback. Shares reversed course on Tuesday, gaining 5 percent.

Between major legal challenges across several continents, increasing competition from Google Inc's Android -- now the world's most-used mobile software -- and confusion over what its next groundbreaking product will look like, more cautious investors are re-evaluating their positions and cashing in some holdings ahead of Apple's second-quarter earnings next Tuesday.

There's reason for caution: Apple's shares surged nearly 60 percent to a high of $644 this year. The slightest sign of trouble in the earnings report may prompt further profit-taking.

"Any disappointment in Apple could lead to a significant selloff in the short term," said Channing Smith, co-manager at Capital Advisors Growth Fund. "Are we long term believers in Apple? Absolutely, but as we move get up here to over $600 and you say, ‘Hmm, this is getting pretty frothy, expectations may be getting out of line.'"

Apple shares fell 7 percent when the company missed Wall Street expectations for the first time in years last October.

Should investors choose to park their cash elsewhere, many believe they will eventually return.

Most investors remain bullish on the longer-term -- 45 out of 53 Wall Street investment banking analysts still have "Buy" or "Strong Buy" ratings on the stock, citing robust iPhone and iPad sales and new products from a TV to a 4G iPhone coming down the pike.   Continued...

A man looks at his Apple iPad in front an Apple logo outside an Apple store in downtown Shanghai March 16, 2012. REUTERS/Aly Song