Apple stock fell from US$702.10 to US$525.62, reaching its lowest level since February. Does it symbolize the beginning of the end?
Shares of the maker of electronic gadgets fell $11.26, or 2.1%, to $525.62 Thursday as part of a selloff since hitting a closing high of $702.10 on Sept. 19. That marks a 25% decline in the value of the stock from its high, placing it well beyond the 20% decline that characterizes a bear.
Apple stock, rather than leading the market higher or being immune to its troubles, is a major ankle weight this time. Since the day Apple’s stock peaked, the broad Standard & Poor’s 500 index is down a much more subdued 7.4%.
“Investors had believed Apple would take over the world, management was flawless, its products were in infinite demand and competition couldn’t make a dent,” says Jeffrey Gundlach, portfolio manager at DoubleLine Capital, which is betting against the stock. “People overbelieved in Apple.”
Some recent events explain the reasons behind the plunge.
- Samsung started to charge higher prices on components. A lot of people may not know, but several components and parts used on the iPhone, iPad and other Apple products are actually manufactured by Samsung. Apple won a court case this year, which resulted in a US$1 billion verdict for Apple. On the long run, this won’t be very meaningful for Apple since Apple depends more on Samsung in terms of hardware. Of course, Apple may want to totally replace Samsung components by seeking other component suppliers soon, but they may experience compatibility issues and it this kind of transition takes time.
- The death of Steve Jobs. Investors are worried that the death of Steve Jobs may signify the death of innovation. Apple’s recent products (the iPhone 5 and the iPad mini) do not show much innovation as its predecessors. With Steve, Apple used to be a pioneer. The iPhone introduced dual touch. The iPod completely changed the music industry. With Tim Cook, Apple is following its competitors. The iPhone 5 comes with a bigger screen, but Apple’s rivals that have too. The iPad Mini is a smaller version of the iPad but Apple’s competitors introduced smaller tablets years ago.
- Consumers are increasingly finding themselves with less discretionary income left for gadgets, including the ones from Apple, says Trip Cowdhry of Global Equities Research. And there’s an increasing view the quality of Apple’s products aren’t premium enough to deserve the premium pricing, he says.
- Ditching some Google Apps was not the right call. Analysts all knew that at some point, Apple would ditch YouTube and Google Maps from its devices. Although you can install install YouTube, it is no longer included by default. Replacing Google Maps by the faulty and buggy Maps app was the wrong call according analysts. Some even think that if Steve was still alive, the new iPhone 5 would still be released with Google Maps by default.
Investors in Hong Kong are worried about the future of Apple and its products. On the other hand, Samsung has joined a massive campaign, which began a few years ago but became outstanding since this year, when it started advertising its Samsung Galaxy S3 and Galaxy Note 2 across the SAR, especially at the MTR stations and billboards in highly populated areas.