Apple shares slide by most in over four years on disappointing iPhone sales

Thu Jan 24, 2013 12:45pm EST

A security guard stands next to an Apple retail store during the release of the iPhone 5 in Shanghai December 14, 2012. . REUTERS/Carlos Barria

A security guard stands next to an Apple retail store during the release of the iPhone 5 in Shanghai December 14, 2012. .

Credit: Reuters/Carlos Barria

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(Reuters) - Apple Inc's shares fell by as much as 12 percent on Thursday, staging their biggest percentage drop in over four years and slicing more than $50 billion from the company's market value, as disappointing holiday-period iPhone sales reinforced fears it is losing its dominance in smartphones.

Eighteen brokerages, including Barclays Capital, Mizuho Securities USA, Credit Suisse, and Raymond James cut their price targets on the stock of the world's biggest publicly traded company by an average $132 to $612.

Apple's shares slid to $450.66 at the open on the Nasdaq, before recouping some of their losses.

The stock hit a peak close of $702.10 on September 19, valuing the company at $658 billion. Since then, it has lost about $225 billion, or 35 percent, of its in market value -- or about the entire worth of Chevron Corp, the second biggest U.S. oil company.

Jefferies & Co cut its rating on Apple's stock to "hold" from "buy" and slashed its share price target by $300 to $500.

Jefferies analyst Peter Misek, who has previously raised red flags about Apple cutting orders to suppliers, said the iPhone slowdown was "real and material" and here to stay.

"We think Apple is losing the screen-size wars," Misek said, noting that demand was moving away from the iPhone's 3.5-inch and 4-inch screens to screens of 5 inches offered by rivals such as Samsung Electronics Co Ltd, HTC Corp and Nokia Oyj.

Samsung, which is at the same time Apple's chief rival and biggest component supplier, overtook Apple as the biggest seller of smartphones in the third quarter, selling close to 500 handsets a minute.

Apple said it shipped a record 47.8 million iPhones in the December quarter, but this was well below the average analyst forecast of 50 million units.

The company's margins were also hit, sliding to 38.6 percent from 44.7 percent a year earlier, partly because its iPad is cannibalizing its high-margin Macintosh computers.

Expectations heading into the results had been subdued by news of possible production cutbacks, putting pressure on Chief Executive Tim Cook to keep up the company's momentum.

NEW PRODUCTS NEEDED

Analysts said Apple's growth would hinge on new products, but added that a new launch wasn't on the horizon.

"To re-accelerate growth, Apple likely needs to launch new products, yet few seem likely before June," Nomura's Stuart Jeffrey said.

The company has been long rumored to be working on a television but has so far deflected questions on its existence. Apple hasn't launched a new line of products in almost three years, apart from a smaller version of the iPad.

Some analysts questioned the company's strategy of betting its fortunes on one phone, while others said a cheaper iPhone could arrest losses of market share.

"Apple's modus operandi to date has been to cream the high-end off each market, but as the company's grown it may now need to target more of the mainstream," Evercore Partners analysts said.

Up to Wednesday, 24 analysts had lowered their price targets since October when Apple reported its fourth-quarter results, according to Thomson Reuters data.

Apple shares were down 10.3 percent at $460.66 in late morning trading.

The disappointing results also hit shares of some of Apple's suppliers. Cirrus Logic Inc, which gets nearly 80 percent of its revenue from Apple, fell 10 percent while shares of Skyworks Solutions Inc, which depends on Apple for about a quarter of its revenue, slipped 5 percent.

Cirrus makes audio-related chips while Skyworks provides power amplifiers for Apple products.

Apple is the lowest ranked stock among the marquee technology firms in the United States based on the change in analyst sentiment, or Analysts Revision Model (ARM), according to StarMine.

Apple's global ARM score of 10 is well below Google Inc's 34 and Microsoft Corp's 19 out of a possible 100. Nokia and Samsung have scores of 82 and 89, respectively.

Research in Motion Ltd has a perfect score of 100, according to the model, which measures analysts' revision of key indicators such as earnings and revenue estimates and changes to their ratings.

(Additional reporting by Saqib Ahmed; Editing by Saumyadeb Chakrabarty, Rodney Joyce and Ted Kerr)

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Comments (6)
jscott418 wrote:
Apple hurt itself with its own products. Mac sales are down because of more iPad sales and iPods sales have been falling because of iPhone sales. In the end people (even Apple fans) are value buyers in this economy. They may still want Apple products. But their willing to accept a iPad at $325 then a Mac at over $1000. In the end Apple is really a affluent targeted company that attracts buyers with deeper pockets. Apple will be challenged in markets like China where median incomes are far below that of the US market where Apple has done the best. Plus, let’s be honest. Apple does not have its best salesman anymore in Steve Jobs.

Jan 24, 2013 8:20am EST  --  Report as abuse
reality-again wrote:
The problem with Apple’s stock doesn’t seem to be related to the company itself, or to its products.
It’s just that the more sophisticated investors are finally coming to realize that Apple simply can’t keep growing and succeeding as much as it did before, since it has lost the momentary advantages it had years ago in a number of key fast growing markets.
In other words, the mass illusion of ‘Apple Forever’ is starting to fade.
It’s about expectations.

Jan 24, 2013 9:11am EST  --  Report as abuse
BlueOkie wrote:
It doesn’t compete in markets it makes them (IPAD< IPHONE etc)

Jan 24, 2013 10:30am EST  --  Report as abuse
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