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Analysts highlight bright spots ahead of Apple's Q2 report

BGC boosts its rating on Apple shares, recommending investors buy the stock ahead of new product cycles. And Sterne Agee says it appears data points are hitting a bottom.

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Shara Tibken was a managing editor at CNET News, overseeing a team covering tech policy, EU tech, mobile and the digital divide. She previously covered mobile as a senior reporter at CNET and also wrote for Dow Jones Newswires and The Wall Street Journal. Shara is a native Midwesterner who still prefers "pop" over "soda."
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Apple's fiscal second-quarter results aren't expected to be particularly cheerful, but some analysts are still finding reasons to be bullish.

The Cupertino, Calif., company will report its January-March quarter results on Tuesday, and no one is expecting a blowout. The company could make history with its biggest second-quarter sales yet, but it's also expected to post its first decline in profit in a decade.

Despite worries about Apple's recent performance, BGC boosted its rating on Apple's stock to "buy" from "hold," saying investors should take advantage of the recent weakness to scoop up shares ahead of the next product cycle.

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"We are not saying that the challenges facing Apple as the tablet and smartphone markets evolve are going away (declining [average selling prices], saturation of developed economies, lackluster innovation), but it is possible that the pessimism surrounding the stock could lift as we approach the next product refresh cycle," BGC analyst Colin Gillis said in a note to investors.

However, BGC cut its target price for the stock to $500 from $550 and lowered its expectations for January-March quarter results to the low end of Apple's projected range. The firm also cut its estimate for iPhone and iPad sales in the current quarter, which ends in June.

The firm noted that the market appears to have already taken into account a slowdown in demand for iPhones and iPads ahead of new devices. That means any positive news could send the stock higher, possibly even reaching BGC's price target by this fall. The firm doesn't expect Apple's stock to return to its all-time high of $705.07 this year. It's possible that Apple stock may never reach that level again.

On the positive side, though, Apple didn't warn that its results would be lower than it forecast, which BGC says means revenue and earnings will likely be in the range provided in January. And while Apple's current quarter forecast is likely to be "tepid," that's expected, the firm said. In addition, a revamp of iOS by Apple's Jony Ive may drive interest in an iPhone 5s even if the hardware looks the same.

Sterne Agee, meanwhile, also said it's likely Apple's fiscal second-quarter results will hit the lower end of its guidance, slightly below what the Street expects. The firm added that expectations for the current quarter have been lowered "adequately" to reflect a slowdown ahead of new products.

"The good news is that data points appear to be hitting a bottom," Sterne Agee analyst Shaw Wu said in a note to investors.

Correction at 9:20 a.m PT: A typo in Sterne Agee has been fixed.