NEW YORK (AP) -- Apple's stock is falling before the markets open Tuesday after first-quarter results disappointed investors and it provided a cautious second-quarter revenue forecast.
While Apple Inc. sold more iPhones and iPads than in any previous quarter, investors were expecting even bigger things from the Cupertino, Calif., company. The fiscal first-quarter numbers reinforced perceptions that Apple is now mostly selling its mobile devices to repeat customers who are upgrading to the next generation in the product line, instead of reeling in new converts to its technology. A similar problem also appears to be looming for Samsung Electronics, which competes fiercely against Apple and the iPhone.
Apple Inc. expects second-quarter revenue of $43 billion, about 43 billion shy of what Wall Street was looking for.
Glen Yeung of Citi Investment Research said first-quarter iPhone shipments of 51 million were below the consensus expectations of 56 million. He said that there were some delays early in the first quarter, but that his own research suggested the iPhone5S was widely and easily available by early December, which means demand was likely be met for customers that wanted the device.
Yeung lowered Apple's price target to $560 from $580 and reaffirmed a "Neutral" rating.
Pacific Crest's Andy Hargreaves still believes that new products or services are needed if Apple wants to re-ignite growth.
"We believe the most likely near-term candidate is a larger-screen iPhone, which we expect this year," the analyst wrote.
Longer term, Hargreaves thinks advertising, commerce and video services are significant opportunities, but that there's uncertainty surrounding them. The analyst is not sure about the possible earnings power of a watch "because we do not see material consumer value in the competitive products we have seen to date." Hargreaves is also unsure about a larger-format iPad, saying it would likely cannibalize sales of current 9.7" iPads and MacBook Airs.
Hargreaves maintained a "Sector Perform" rating.
Shares of Apple declined $39, or 7.1 percent, to $511.50 before the market open.