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Apple Earnings Preview: Here's What Pros Say May Turn Apple Around

Apple CEO Tim Cook.
Getty Images
Apple CEO Tim Cook.

All news about Apple seems to be bad news these days. And with the company scheduled to report second-quarter earnings Tuesday, it's likely that's not going to change much, analysts said.

(Read More: Apple Earnings: What You Need to Know )

The company is expected to report earnings of $10.12 per share on revenue of $42.6 billion, according to a poll by Thomson Reuters—which is within the company's guidance for revenue of $41 billion to $43 billion. However, the company is also expected to issue a lowered guidance for the third quarter, according to analysts.

(Read More: Apple Breaks Below $400 for First Time Since December 2011)

And while it is widely speculated the company may issue a bigger dividend or expand its share buyback program when it announces earnings—which would likely give the stock a boost—the increase would only be short lived, said Trip Chowdhry, co-founder of Global Equities Research.

(Read More: Why Whispers of Apple Ousting Tim Cook Are Likely Untrue )

"People have to be patient. The next quarter will be disastrous and the quarter after that the stock will only go in one direction and that is down," Chowdhry said.

"But," he added, "Apple's stock has the potential and power to go back to over $1,000."

Chowdhry—who has a $600 price target on Apple over the next 12 to 18 months—said that Apple can turn its stock price around if it launches a new product.

"Apple is just like the movie business. Basically, you have to come up with one hit right after another hit," he said. "Apple needs a breakthrough product. A dividend, or a share buyback, that is just a Band-Aid. A new product could push stock up by $200 in less than a week."

Along with a new product cycle, the company also stands to benefit from growth in new markets, said Brian White, a senior analyst for Topeka Capital Markets.

"The near term is soft, that's not going to surprise anyone," White said. "We are looking forward. There's lots of exciting things beyond the June quarter.

White, who has a buy rating on the stock with a price target of $888, said a cash distribution, a bottom in the profit cycle and new products—like an Apple TV and a smartwatch—as well as growth in regions such as China, will help drive the stock price back up.

White said he expects Apple to issue a dividend increase soon after the company's earnings report and for it to launch a TV by the end of this year or the beginning of 2014. He also said he expects Apple to reach a deal with China Mobile by the end of this year as well as launch a lower cost iPhone, both of which would ignite the company's smartphone growth.

(Read More: For China Mobile, 4G and Next iPhone are Key to Unlocking Apple Demand)

"Long term we are very bullish on Apple. Getting through this rough patch has been tough, but I feel like we are in a bottoming process, because a lot of companies won't be able to invest in these new areas of wearable computing," White said.

Practically any good news regarding Apple would likely turn the stock around, said Colin Gillis, a senior technology analyst for BGC Financial.

In a note Monday, Gillis raised the firm's rating for Apple to a "buy" from "hold" but decreased his price target from $550 to $500.

"Any Apple good news could boost up the stock, because we have not had any Apple good news in 2013, and we are bound to get some at some point," Gillis said.

But not everyone is as optimistic about Apple's long-term prospects.

The Bear Case

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In a note Monday, Citi reiterated its "hold" rating and said it has again lowered its already below consensus estimates for Apple. BMO also cut its price target on Apple from $480 to $440. Just last Wednesday it revised it price target from $560 to $480.

(On CNBC's "Squawk Box" this earnings season, we've been asking viewers and users to test their forecasting skills on whether companies will meet, beat, or miss Wall Street expectations. How will Apple fare? Vote now in our "Armchair Analysts" poll on the website or on the "Squawk" Facebook page.)

Apple's stock was trading below $400 Monday, far from its all-time high of $705 last September when some analysts made calls that the stock would surge to $1,000.

(Read More: How Low Can Apple Go? Let's Just Say 'Quite a Bit' )

But, there's no reason the stock should have traded that high in the first place, said AlphaOne Capital Markets' Dan Niles.

"The question is not why is the stock going down, but why did stock go up in the June quarter anyways? Then they missed the September quarter and people didn't care either. It took until the December quarter when they missed for people to care," Niles said. "It's like stock market in 2007, why is it going up? It's the same thing with Apple: Why did it go up in the first place?"

Analysts who predicted the stock would surge to $1,000 were wrong last September and they are wrong now if they think Apple's stock price will return to its highs anytime soon because the company is suffering from a flawed business strategy that it refuses to fix, Niles said.

Apple's approach to business is too narrow-minded, causing it to lose out to competition from companies like Samsung, Niles said. Apple may still capture more of the smartphone profits, but its business strategy of focusing on the high-end market isn't going to work forever as smartphone adoption continues to grow in developing nations, Niles said.

(Read More: What'll Boost Apple, Google: Gillis)

Unlike some other analysts, Niles said it is unlikely that Apple is on the verge of releasing a lower-cost smartphone and it is very unlikely it will launch iPhones with different display sizes, which the market shows a strong demand for, he said.

"Short term, there will be some excitement around Apple when it launches its TV, so you are going to have a little bit of a run. But for the long term, they just have to compete. They have to compete with a range of products in a range of different price points," Niles said.

Chowdhry also said a low-cost iPhone is unlikely, but added that that's actually good for Apple because staying at the higher-end of the market gives its products more value.

"Certain things have value because they are aspirational and are difficult to get," Chowdhry said. "You don't want to be another Dell. Think of it, have you seen anyone bragging that they have a Dell computer? It's not good anymore."

Chowdhry said that while he doesn't see a low-cost iPhone on the horizon, he does see the company launching an iPhone with a bendable screen and said he expects a TV launch before the end of this year, which will also spur growth. Beyond that, Apple will continue to unveil newly developed products that will continue to spur its growth, he said.

"The problem is not competition or financial. The problem is customers have very high expectations from them, and rightly so, because Apple is the only company that has transformed our lives," he said. "Remember, we cannot underestimate Apple. People are rightly expecting a similar product, and I think they will deliver."

Market Insider with Patti Domm