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AAPL Stock: 107.34 ( + 0.6 )

Printed from http://www.macnn.com

AAPL tumbles to 10-month low, down 27 percent from peak

updated 10:00 pm EST, Fri December 28, 2012

Genuine fears for future, or just profit-taking ahead of cap-gains rise?

As AAPL shares lost another percentage point on Friday to close the week at a 10-month low, investors point to a number of factors behind the sell-off, which has seen the stock lose 27 percent of its value since an all-time peak price of $705.07 in September. While the stock is still up for the year (about 25 percent), factors ranging from worries about the so-called "fiscal cliff" to fears that the company's popularity is cooling off may be spooking investors.

Two of the biggest factors outside of Apple's control that may be playing a role in the drop are the anticipation of a capital-gains tax increase early in the new year, and market nervousness about the alleged "fiscal cliff" set of cuts scheduled to take effect at the end of the year. Regardless of whether the two political parties can work out a deal, capital gains taxes -- which have been at historic lows for years now -- are almost dead certain to rise, and for the most wealthy investors the rise could be substantive (from 15 percent to over 28 percent). Short-term investors will also see a rise, but much more modest in scope.

The default cuts that might come into effect if the parties cannot reach an agreement would have a severe effect on the military and federal sector, but is not intended to be quite as melodramatic as often portrayed for the majority of private citizens and businessmen. However, combined with the likely rise in cap-gains taxes, many long-time investors are taking the opportunity to cash out their holdings before any new legislation appears. Indeed, a number of Apple executives have done exactly that for the same reasons.

Rumors that the iPhone 5 -- which has recently achieved a sales-to-inventory parity much faster than its predecessors -- is not as popular as the previous models have also hurt the stock, though these reports have been largely discredited -- and demand for the iPad mini is seen to be on a huge upswing. The iPad and the iPad mini were the clear big winners in this year's holiday gifting, as indicated by having managed the unprecedented feat of topping -- for one day only, December 25 -- the number of activations of smartphones (the tablet activations include all tablets, not just Apple, but the company hugely dominates that segment).

There are very few willing to predict that Apple won't have yet another record-breaking balance sheet once the fiscal Q1 2013 figures are reported in January, but the slow pace of any truly new products (apart from the iPad mini, most upgrades in the second half of 2012 were relatively minor updates rather than revolutionary changes) may also be a cause for concern among long-term investors. Rumored products such as the so-called "Apple HDTV" and the reinvented Mac Pro -- both "delayed" from when analysts originally expected them -- have not yet materialized, even while some markets such as Apple's iPod line have peaked in maturity and, while still outperforming expectations, are in overall decline.

Having built its enormous growth mainly on innovation, the normal cycle of polishing and perfecting the existing lines has some speculators worried that the company's best days may be behind it, or that it will repeat history by slowly losing share in various segments to rapidly-gaining competitors such as Google, RIM, Amazon and Microsoft. While too soon to tell, early indicators on sales of Google's flagship tablet (the Nexus 7) and Microsoft's foray into the space have thus far failed to live up to expectations. Meanwhile, Amazon's Kindle Fire HD also looks to be a distant second in both the small-form and full-form tablet arena, and it remains to be seen if the BlackBerry smartphone platform can stage a comeback in 2013.

In the near-term, investor worries about AAPL seem misplaced -- but when combined with tax and economic factors outside the company's control, they could signal some future concerns that Apple's more stellar growth percentages won't be repeated to the same extent in 2013, though the company is still expected to have a very healthy year. The current price of the stock is a clear buying opportunity, and trading at less than 12x of EPS, an attractive multiple. In the longer term, the company -- ironically like RIM, which Android and iOS have all but forced out of the market -- will have to prove that it can still create completely new products and sales categories, and find an audience to sustain its growth.





by MacNN Staff

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Comments

  1. Bobfozz

    Fresh-Faced Recruit

    Joined: 07-28-08

    So WHO are these investors going to invest in again? Ah yes, nobody. Time to stick cash under the mattress.

  1. ruel24

    Fresh-Faced Recruit

    Joined: 09-17-09

    I think this has more to do with poor launches and lackluster upgrades. The iPhone 5 wasn't a slam dunk. The new maps was a poor launch. Nothing revolutionary has come from Cupertino in a while. Then there is Cook, who simply is about as far from Jobs as you can get. He simply lacks charisma. It's no wonder the investment community doesn't see Apple going where they once saw it. Apple needs a home run product launch or two and to get its ducks in a row.

  1. Spheric Harlot

    Clinically Insane

    Joined: 11-07-99

    Originally Posted by ruel24View Post

    The iPhone 5 wasn't a slam dunk.



    The iPhone 5 got off to a start as the best-selling smartphone in history. It's just that this is totally inline with expectations, these days — for Apple.

  1. ruel24

    Fresh-Faced Recruit

    Joined: 09-17-09

    Originally Posted by Spheric HarlotView Post


    The iPhone 5 got off to a start as the best-selling smartphone in history. It's just that this is totally inline with expectations, these days — for Apple.



    You seem to fail to realize that sales does not equal market value in the investment world. MacDonalds once had a 10% growth in one year, which is significant for their size, and the stock actually went down based upon the news because the market expected more. Share prices are based upon future expectations, and not what the company has done. One of the biggest reasons for the iPhone 5's success in sales is the much anticipated LTE chip. Other than that, most people felt let down by the features. The increased screen size was dubbed a gimmick. The maps disaster...the initial reports of scratches on the phones... It all adds up. It's this let down in the market that has the market thinking that future products aren't going to be so remarkable as they were in the past, thus investors are less willing to pay premium for the stock.

  1. Spheric Harlot

    Clinically Insane

    Joined: 11-07-99

    Substitute "4” for "5” and repeat. Then do it again with "4S".

    It's complete bullshit. The iPhone 4 and iPhone 4S were failures, riddled with issues, PR disasters, unconvincing features...and completely unprecedented sales.

    It all added up, and Apple had obviously lost their touch every fall for three years running now.

    The stock market is a fickle and stupid thing, and it bears no relation to actual sales, as you say. Apple's stock may be losing its appeal somewhat as people realize that Apple will no longer have 50-fold increases in stock value, but if it's due to Apple's products performing in line with expectations, that's not a problem for Apple, nor one they can solve.

  1. climacs

    Forum Regular

    Joined: 09-06-01

    Buy now, or in a month you'll be wishing you had.


    There's still time on Monday 12/31 to buy. I guarantee the stock will pop when the markets open on Wed. Jan 2nd. and again when earnings are announced three weeks later.

  1. climacs

    Forum Regular

    Joined: 09-06-01

    Originally Posted by ruel24View Post

    Share prices are based upon future expectations, and not what the company has done.



    also on rumors, short-seller action, etc.

    Amazon still trades at an unreal P/E. I would short it but I don't have the balls, a bubble can get really really big before it pops.

  1. TheMacMan

    Fresh-Faced Recruit

    Joined: 08-06-06

    I think it would be foolish to say that the balance sheet doesn't count because it does. How the company performs absolutely affects the stock price but so does futures, economy, real estate, taxes, regulations, politics, and the environment. Where the stock is going is not science. So, you can't really form conclusions why stocks go up or down, you can only speculate. Hence the the term "Stock Market speculation".

  1. Eldernorm

    Fresh-Faced Recruit

    Joined: 09-26-07

    " off may be spooking investors." As one person said... those are speculators NOT investors. People forget that the whole stock trading thing was so people could have a part of the company and grow with it. But the speculators and day traders only care about the profit they can make on the ups and downs of a companies stock.

    These speculators have learned how to help a companies stock twitch up and down so they can make a quick profit. There is no "investing" about any of this.

    Apple has more cash than most companies are worth. sells products that are wanted around the world, and has a supply chain that companies would kill for.

    Yet their stock sells for less than Amazon who only sells other peoples things and makes pennies on the dollar for it. Apple makes more profit in a week than Amazon makes in a year....... yet somehow Amazon is a better stock to buy???????

    As Steve Jobs said... "I just cannot figure out wall street"!!!!!

    Just a holiday thought.
    en

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