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Apple earnings preview: Second quarter may test investors' patience

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Three months ago, when Apple reported its holiday earnings, the company posted record revenues thanks to refreshed lines of iPads and iPhones that had launched in the fall. 

But instead of basking in a big win, Apple got pounded by Wall Street because of what the company said would happen in this current quarter. Apple projected a range of revenue expectations that raised the possibility of its first revenue decline in more than a decade.

Apple is scheduled to report second-quarter earnings after the markets close Wednesday, and most analysts think the company will actually squeak out a slight revenue gain. And since the last earnings call, Apple's stock has recovered most of its losses, closing Tuesday at $531.7, up from a dip below $500 a couple months ago. 

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Still, investors and analysts are not exactly bubbling with optimism about Apple these days. They seem resigned to the fact that the days of rocket-like growth of iPhone and iPad sales are over. Indeed, more than half the analysts polled by Fortune expected that Apple would report that iPad sales declined in the March quarter. 

The company itself forecast revenue of $42 billion to $44 billion for the quarter, compared with $43.6 billion for the same quarter a year ago. Currently, Wall Street's consensus estimate is around $43.62 billion for the quarter. 

On the profits side, Wall Street is expecting earnings of $10.22 per share, compared with $10.09 a year ago. The increase is due in large part to Apple's increasingly aggressive stock buyback program.

Analysts have accepted the fact that Apple is going to continue to focus on the higher-end, premium market for gadgets. Last year, many were hoping and expecting the company to unveil a lower-priced iPhone in order to be more competitive overseas and at least stem its market-share losses to Android. 

But with Chief Executive Tim Cook making it clear that Apple would continue to focus on quality over quantity of units sold, most analysts have stopped talking about a cheaper iPhone.

"We see Apple as a provider of premium priced electronics, a lucrative market but one that may not sustain its current market valuation of $473 billion in the years ahead," Colin Gillis, an analyst at BGC Financial, wrote in a note to clients this week.

In the short term, that has some Apple watchers growing more pessimistic. Brian White, a Cantor Fitzgerald analyst, lowered his outlook for the current quarter that ends in June. Instead, like many analysts, he's looking ahead to the second half of the year, when he hopes some much-rumored new products such as a bigger iPhone will materialize. 

"In our view, the ramp of the iPhone 6 (4.7-inch and 5.5-inch "iPhad"-like device) and iWatch in the second-half of CY:14 are more important than Apple's 2Q:FY14 performance and potentially soft 3Q:FY14 outlook," he wrote in a note to clients.  

Analyst Gene Munster of Piper Jaffray was a bit more optimistic about Apple's earnings for the second quarter, expecting the company to report $44 billion, close to the high end of its range. But he's also expecting Apple to forecast 5% growth for the current quarter, below the 8% Wall Street currently expects. 

Of course, there's almost zero chance that Cook will say anything about new products Wednesday. Most likely, Apple watchers will have to wait for its World Wide Developers Conference in June for any talk of updates or new products. 

The question for Apple is how long investors will be content to ride out a quiet period until those mythical new products appear.

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