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Concerns over mobile take shine off Apple

A visitor tries out a new iPad tablet computer at an Apple store in Malaysia, Friday, April 20, 2012. Sales of Apple's new iPad began Friday morning in the country.

Lai Seng Sin/AP/Lai Seng Sin/AP

Apple Inc. reports its second-quarter earnings this week, at a time when the most valuable technology company in the world is going through some serious stock market turbulence.

Apple will announce its second-quarter numbers after market close on Tuesday. For years, such announcements have usually seen the company demolish analyst expectations, sending its stock price soaring. But given what has happened to Apple's share price over the past seven days, investors may be a little more skeptical this time around.

Apple shares have had a pretty miserable week. After hitting an all time high of $644 (U.S.) this month, shares were down to $573 by the end of Friday – meeting the definition of a correction, or a drop of 10 per cent or more from a high.

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Such a significant drop may signal investor concerns about Apple's upcoming earnings, but may also be related to hints that Apple's dominance in the mobile device market isn't as total as once believed. Some investors pointed to signs from chipset-makers and telecom carriers that phone shipments may be slowing.

At the same time, smartphones powered by Google's Android operating system are increasingly taking up a larger share of the overall market – even as Apple continues to reap the vast majority of handset industry profits.

But despite investor trepidation, analysts are still extremely bullish on Apple shares. Even as the company's stock price suffered this week, Goldman Sachs raised its 12-month price target for Apple to $750 from $700.

Canaccord Genuity technology analyst Michael Walkley also raised his price target for Apple shares last week to $740 from $710, even as he noted some softness in Apple's phone sales.

"Our recent channel checks indicated iPhone sell-through share has modestly declined in certain developed markets, and we expect this could continue as Android competitors ramp new smartphones during the June and September quarters and consumers start to hold off iPhone purchases in anticipation of the iPhone 5," Mr. Walkley wrote in a note to clients.

However he added that any such setback would likely be temporary, as consumer demand picks up again once the company introduces the iPhone 5 later this year, as is widely expected.

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