Apple Takes Baby Steps Forward


Analysts are taking baby steps forward with Apple .

Barclays Capital analyst Ben Reitzes is raising his price target on the tech bellwether from $465 to $525. Remember when some Wall Street pros were starting to openly discuss four-digit price targets? Scorched analysts are taking more realistic cracks at predicting where the stock will go from here.

Apple's been rolling, logging its best two-week run in a long time. Since bottoming out two weeks ago, shares of Apple have soared 18% as of today's open.

Reitzes is also marginally raising his near-term profit and sales targets, but Wall Street has been moving the other way.

Last week I went over how analysts have been paring back their earnings estimates on Apple for fiscal 2013 and fiscal 2014. Apple stock may be rising, but bottom-line forecasts have been shrinking. Last week the consensus estimate called for earnings to fall in 2013 and for profitability in fiscal 2014 to be marginally higher than it was in fiscal 2012.

Well, the latter half of that observation is now obsolete. Wall Street now sees Apple earning $44.09 a share next year, and that's less than the $44.15 a share it earned in fiscal 2012.

None of this is fatal. In fact, Barclays Capital isn't the only analyst that has come to accept that Apple shares could continue to rise in this climate of falling profitability and contracting margins.

The market can overlook negative earnings growth and shrinking margins it if believes the company has a plan. is a perfect example. The stock is near its all-time highs despite coming off eight consecutive quarters of year-over-year declines in profitability. Wall Street's cool with that, recognizing that Amazon is sacrificing near-term margins for the sake of market share.

Apple is earning that distinction. After all, Apple's margins wouldn't be taking it on the chin if the company wasn't gunning for a larger mainstream audience by keeping its older iPhones around at lower price points and introducing the value-priced iPad mini tablet.

Apple burned growth investors late last year and through the first three months and change of 2013. Now the market is framing Apple as a value play with boxed up catalysts waiting to open the next time that the tastemaker introduces something new.

Apple may not be improving fundamentally, but the market's opinion of Apple is certainly improving.

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