Apple a victim of its own success

Updated 4:45 p.m. ET

Apple (AAPL) has the toughest act for any company to follow -- itself.

The company, which has routinely smashed Wall Street earnings expectations for years, saw shares tumble more than 12% Thursday to close at $450.50 after quarterly results that seemed to confirm investors' worst fears about slowing growth. Hope is fading that the situation will improve soon.

The iPad, iPhone and MacBook producer earned $13.08 billion, or $13.81 per share, in the latest quarter -- little changed from $13.06 billion, or $13.87 per share, a year earlier. That was the weakest quarterly profit performance since 2003. Revenue rose 18% to $54.5 billion, the slowest rate since 2009.

But there was brighter news in the quarter. Apple sold a record 47.8 million iPhones and a record 22.9 million iPads. Apple also generated record cash flow from operations of more than $23 billion. Sales of Macs and iPods, however, fell, underscoring investor worries about the lack of a new blockbuster product. 

About 18 brokerages have slashed price targets on Apple shares in the wake of the earnings report, according to the Associated Press. Others, such as Jefferies & Co., cut their ratings to "hold" from "buy." This represents a sea change from last year, when it was tough to find any analyst who wasn't incredibly bullish on the stock.

"We don't think the Apple growth story is over, but shares will likely languish until confidence is restored," writes Stern Agee analyst Shaw Wu in a note to clients quoted by the Wall Street Journal.

One bright spot was China, which had previously concerned some investors following media reports that consumers were indifferent to the launch of the newest iPad. Revenue in the world's most populous country rose 67%.

Apple's stock is being punished harshly by Wall Street in part because it changed its approach to earnings guidance. In the past, the company gave conservative figures that were so low that Apple would regularly blow away its own estimates along with those of Wall Street. Under Apple's old approach, its results beat Wall Street expectations by an average of 26% for years, according to Bloomberg News. Apple now expects to give more accurate earnings guidance.

That new policy is already disappointing analysts. Apple forecast revenue in the current quarter of between $41 billion and $43 billion, below the $45.5 billion analysts had expected.

Wall Street is hardly throwing the towel in on Apple, however. The average 52-week price target on the stock is $713.32, more than 50% higher than where it currently trades. Apple, though, faces a long road ahead to get to that lofty theoretical valuation.

Jonathan Berr does not own shares of the listed stocks.  Follow him on Twitter @jdberr.

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