Apple’s stocks had been heading downwards for the eighth straight week now as investors try to get out of a potential hike in capital gains early next year. The largest U.S. stock market by value has seen itself being dumped as the market favorite by investors shortly after Apple hit a record high $705.07 per share last September.
The company has since then lost about a quarter of its value, outpacing the stock decent of S&P 500 in the same time frame, which only falls to 7 percent.
As what Erik Davidson, an investment officer for Wells Fargo Private Bank said, “No individual investment can defy gravity.”
The stocks decline for Apple translates to about $170 billion in market capitalization, a figure just a little more than the entire value of Coca-Cola. The Cupertino-giant is currently worth around $493 billion, still about $100 billion more than its distant second, Exxon Mobil.
The reason behind investors dumping away Apple is primarily to lock gains and offset the potential higher taxes next year. The looming fiscal cliff has also prompted investors to prepare for the worst by selling high priced stocks today.
The selling of stocks are due to uncertainty in talks about the upcoming fiscal cliff. On the other hand, buyers are not that many as they are also procrastinating how the fiscal cliff will be handled, according to Bucky Hellwig, a senior vice president from BB&T Wealth Management in Alabama.
“You probably have an inordinate effect to the downside because of these tax strategies,” he said.
Today’s tax rate of 15 percent for dividends and capital gains will expire at the end of this year, which means that they will revert to ordinary income taxable by 35 percent for those with the highest earnings.
The rapid stock descent of Apple is a complete reversal for the company who had seen consistent growth year after year since 2003, with the exception of 2008 during the global financial crisis.
“If you’ve got all these gains – which a lot of Apple investors have because it’s done very, very well – then you’re going to see selling in the likes of Apple and other companies that have had good runs,” Erik Davidson commented.
Still, Thomson Reuters StarMine forecast that the company’s stock intrinsic value is at $8.33.90 per share. The estimated value is based on analyst estimates for Apple’s growth in the next five years, as well as StarMine’s forecast growth rates several years afterwards.
Chief equity market strategist at Federated Investors Phil Orlando said that tax concerns are probably the motivating factor for the recent stock dumping of investors, given that the stock is worth more than its current trading value.
“I think the stock is worth $750. If you are sitting here looking at Apple trading at $500, you say, ‘Well the stock ought to be 50 percent higher over the course of the next year or two,’ so the stock looks pretty attractive,” he added.