Last Wednesday saw the biggest single-day loss for Apple in 4 years following the a dive of company’s shares to 6 percent in the midst of the ever increasing competition in the lucrative mobile market.
Both analysts and investors point to a few factors as reasons for the sell-off including a forecast by an influential research company that says Apple is losing ground to its main rival, the Android operating system of Google Inc. There are also rumors that one major stock-clearing house was trying to raise margin requirements for Apple stock trades.
Another reason cited by analysts are fears among investors about a possible hike in the capital gain tax in 2013 if Washington fails to resolve the fiscal cliff, and the news that Nokia outbid Apple to sell its Lumia smartphones through China Mobile, China’s largest wireless carrier.
More than 37 million shares changed hands, translating to a shedding of about $35 billion in market value. The stock was the one of the biggest losses in terms of percentage on the S&P 500 on that day.
Apple shares were once considered the most desirable of portfolio holdings. However, the company’s shares have since then plummeted as Apple struggled to curb the growing competition from rivals since September. Microsoft Corp’s entry into the mobile market as well as strong sales of Amazon.com’s Kindle Fire have significantly threatened Apple’s dominance of the mobile sphere.
Samsung Electronics is also continuing to take away Apple’s dominance with its innovative Galaxy flagship.
Apple CEO Tim Cook, who replaced the charismatic Steve Jobs following his death, is charged with defending its consumer-electronics dominance. Apple is world’s largest technology company.
Brian Battle, director of trading at Performance Trust Capital Partners said that Apple’s current downward spiral is not temporary as it is a long-term management test now that Steve Jobs is out of the picture. He said that Apple needs “another home run” to be able to reach the $700/ share mark again, while referring to the iPad mini, which is simply a smaller version of the current iPad.
“They need another new product that hits it out of the park. Without that, they could get a gradual grind-down in confidence,” Battle said.
International Data Corp said on Wednesday that Apple will most likely lose ground in tablet computer market this year. The research firm forecast that Apple’s total market share for tablets will decrease to 53.8 percent from 56.3 in 2011. it predicted that Android products will increase their share from 39.8 percent to 42.7 percent over the same period.
The looming fiscal cliff that could significantly affect dividends and capital gains is another concern that pushed investors to shed their shares before 2013. The uncertainty over the hotly debated fiscal cliff issue and the resulting higher tax rates on dividends and capital gains next year are more than enough reasons for investors to sell off their shares.
The massive value of the stock was responsible for single-handedly forcing last Wednesday’s 1.1 percent drop in the Nasdaq 100 Index.
Apple enjoys a 33 percent rise this year, but has since then fallen 24 percent from its record high $705.07 mark on September 21. Apple’s stock plummeted to more than 6.4 percent, closing at %538.7923 last Wednesday.
A few analysts were wondering why Apple stock, which has been one of the most desirable in most of all growth portfolios, has fallen dramatically. Despite the drop, it is expected that Apple will continue to give strong revenue and earnings expansion in the coming years. At this time, one in every two tablets sold everywhere in the world is an iPad.
Apple is busy preparing to launch its flagship iPhone 5 as well as the iPad mini around the world this coming December, including in China and South Korea.
Hudson Square Research analyst Daniel Ernst said: “Apple stock is significantly more volatile than its earnings and innovation stream. And yet the wind blows slightly from the south instead of the east one particular morning, and the stock is down 6 percent.”
“It makes no sense. There are lines around the block for their products all around the world. No other company has that,” he added.
On a separate note, Nokia said it aims to partner with China Mobile in selling its Lumia smartphones to grab back Chinese market share from Apple’s iPhone.
However, some analysts predict that the biggest cellular market in the world will eventually switch to the iPhone.
“China Mobile already carries multiple smartphones from multiple vendors. We continue to expect China Mobile to add the iPhone in the back half of 2013,” said Piper Jaffray’s Gene Munster in a research note.