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Tuesday, April 23, 2013, 09:25 am PT (12:25 pm ET)

Fiscal 2013 predicted to become 'a year to forget' for Apple, higher hopes seen for 2014

Investors will likely look back on Apple's fiscal year 2013 as "a year to forget," though it will set the stage for a strong 2014, one analyst believes.

Fiscal

The performance of Apple's stock so far in fiscal year 2013.


Ahead of Apple's earnings report for its second quarter of fiscal 2013, Brian White of Topeka Capital Markets issued a note to investors on Tuesday in which he lowered some of his estimates. He now expects Apple to see revenue of $36.5 billion in its third quarter, down from a previous forecast of $43.3 billion, while earnings per share was also cut from $10.42 to $7.83.

White believes Apple's profit cycle likely bottomed out in its recently-concluded March quarter. But he sees the company setting the stage for a strong turnaround, the benefits of which he expects to be seen in the company's fiscal year 2014.

Apple's so-called "year to forget" will be driven by slowdown in the high-end smartphone market, which has negatively affected Apple's growth, White said. His projections call for the company to see a 1 percent decrease in earnings per share during fiscal 2013, which would be the first annual decline since fiscal 2003.

Looking forward to Apple's fiscal 2014, which will begin in October, White expects that Apple will see new growth by expanding the iPhone lineup with a new low-end model. Rumors have suggested the company is working on a low-cost model with a plastic body that could be sold without the need for a carrier contract subsidy.

White also hopes that Apple will introduce products in entirely new categories in fiscal 2014, namely a full-fledged television set and a so-called "iWatch" wrist accessory. Finally, he also expects that Apple will reach an agreement with China Mobile, the largest carrier in the world, to begin offering the iPhone.

Beyond those new growth opportunities, White believes Apple should leverage its $137.1 billion cash balance to attract investors and built a "safety net" around the stock. The analyst has been an outspoken proponent of Apple paying out a higher dividend to investors.

Despite the downward revisions in its estimates, Topeka Capital Markets has maintained a "buy" rating and 12-month price target for AAPL stock of $888 — more than twice its current trading levels.