Apple Stock: It Gets Worse

Apple's stock has been bouncing back big time since last month's uninspiring quarterly report.

Shares of the consumer tech giant have soared 13% in the past seven trading days through yesterday's close.

It may seem strange. Apple's stock chart and its fundamentals appear to be passing ships. Analysts are whittling away their profit estimates on the company just as the stock is showing signs of bottoming out.

As one can imagine, Wall Street's profit targets have come down even more since last week's disappointing guidance. The outlook may have been merely for the current quarter, but the pros have been talking down Apple's bottom-line prospects all the way out to fiscal 2014.

It's pretty grim.

Let's see where analysts were perched in recent months.

Source: Yahoo! Finance.

Most online sources only go out to three months, but I had already done this exercise last month so I can travel back four months to see how swift the revisions have come through two unsettling quarterly reports.

Apple stock, lock, and barrel
Yes, Apple has taken a hit over the past four months. Shares of the company have fallen 17% in 2013. However, in that time we've seen Wall Street's profit targets decline by 18% for fiscal 2013 and 23% for fiscal 2014.

In other words, Apple stock isn't necessarily cheaper. In fact, its forward earnings multiple has expanded even as its share price has retreated.

This isn't some widespread tech epidemic.

Google -- the company that is the most responsible for Apple's contracting margins given the success of its Android mobile operating platform -- isn't attracting backpedalling prognosticators. Wall Street's profit target on Google for 2013 has grown from $45.68 a share to $46.12 a share over the past three months.

Interesting factoid: Four months ago, Apple was expected to earn more than Google on a per-share basis this year. That's no longer the case.

Another interesting factoid: The $44.24 a share that Wall Street sees Apple earning in fiscal 2014 is nearly flat with the $44.15 a share it earned two years earlier.

The silver lining in all of this is that Apple is cheap. The math on the multiples relative to its share price actually shifts in favor of the bullish camp if we back out Apple's ample cash reserves. The rub is simply that we don't know when Apple's gross margin will bottom out. The company has already braced investors for another quarter of declining gross margin.

Analyst targets have also yet to bottom out. However, it's certainly possible that Apple stock did exactly that late last month. Apple now just needs to give investors a catalyst to do more than simply bounce the stock higher.

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 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.

The article Apple Stock: It Gets Worse originally appeared on Fool.com.

Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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