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Will Apple's Earnings Worsen the Stock Selloff?

Monday, 23 Apr 2012 | 1:42 PM ET

Apple’s recent selloff has some experts recommending investors buy on the dips, but skeptics say the decline—coupled with Tuesday's earnings report—could be the beginning of a bigger slide for the tech giant.

Apple Store
Flickr: hairygrumpy
Apple Store

Apple stock closed slightly lower Monday, following the broader market decline, after see-sawing throughout most of the session. The stock briefly dipped below its 50-day moving average of $570 a share earlier in the day.

The stock officially entered correction mode last Friday, tumbling more than 10 percent from its all-time high of $644 a share.

Some analysts called the pullback a “short-term correction,” adding it’s too early for investors to get too bearish on the stock.

“The stock would have to get below a new monthly low [of $516 a share] to think we’d really weaken,” said Mark Newton, chief technical analyst at Greywolf Execution Partners on CNBC’s "Squawk on the Street." “Overall there are still a lot of bullish reasons technically to get involved.”

Investors will be closely watching Apple’s fiscal second-quarter earnings report, due after-the-bell Tuesday. Wall Street analysts expect earnings of $10.02 a share on revenue of $36.7 billion, according to a consensus estimate from Thomson Reuters.

The company outstripped earnings estimatesin the previous quarter, thanks to robust iPhone and iPod sales.

What's the Trade Ahead of Apple's Earnings?
Apple will report its Q2 earnings after the bell on Tuesday. The FMHR traders and Channing Smith, Capital Advisors Growth Fund discuss the best way to trade the stock right now.

“They’re going to beat, but the question is what the beat is going to look like,” Channing Smith, portfolio manager of Capital Advisors Growth Fund told CNBC’s "Fast Money Halftime Report." “Over the last week, earnings estimates have risen well over $10 and unlike past announcements, we’re seeing a lot of upgrades going into the announcement and that makes us cautious.”

Smith also said he's worried that the iPad maker will see pricing pressure and an “innovation gap close” in the next few quarters.

“We’ll be looking for the guidance on what the future looks like [for Apple],” said Kenny Polcari, managing director of ICAP Equities. “I’d wait until the stock moves down to the $500-level where there’s support to jump back in.”

Apple announced plans back in March to institute a dividend and share buyback program. The firm will pay a quarterly dividend of $2.65 per share, starting in its fiscal fourth quarter, which begins July 1.

Follow JeeYeon Park on Twitter: @JeeYeonParkCNBC

Questions? Comments? Email us at marketinsider@cnbc.com

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  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

  • Sharon Epperson is CNBC's senior commodities and personal finance correspondent.

  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

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