Is Apple in decline?

Apple’s stock price is in a steady decline this week. Apple’s stock price has fallen 5% since Tuesday. Today Apple is down again despite the market rallying on better news coming out of Italy. Is Apple’s recent decline and selling pressure a healthy pullback or  a sign that the tech giant is at risk of slowing down?

In mid October Apple’s stock climbed to a record of $426.70 in intraday trading before falling nearly 10% to today’s price of $383.50.

Let’s take a look at the reasons behind Apple’s slide since mid October.

Weaker 3Q earnings

iPhone unit sales were 17.1 million for the  quarter, versus 22 million expected. Apple’s management claimed that iPhone sales were weaker in the third quarter because consumers  in the third quarter were awaiting the release of the iPhone 5 which ended up being the iPhone 4S.

Apple reported third-quarter earnings of $7.05 a share, on revenue of $28.3 billion. On average analysts expected Apple to earn $7.22 a share on revenue of $29.5 billion. According to FactSet data, Apple has not missed earnings forecasts since the second quarter of 2002.

Yesterday Cleveland Research reduced their i-Pad estimates for Q4 from 14 million to 12 million.   Apple’s earning estimates were lowered to $9.53 per share down from a consensus average of $9.70 per share. Cleveland Research explained their lowered revision for 4Q by citing competition from Amazon’s Kindle Fire which has the potential to hurt future i-Pad sales.

Kindle Fire sales are looking strong

Amazon is increasing supplier orders for the Kindle Fire to 5 million units, up from 4 million units.

The new release of Barnes & Noble’s Nook Tablet later next week will likely also impact sales with Apple’s i-Pad.

Yesterday, PC Magazine published an article from Chloe Albanesius which revealed an unofficial PC Magazine poll that asked their viewers about whether they planned to buy a Kindle Fire or Nook Tablet.

The results indicate that 41% or 3318 of respondents plan to buy a Kindle Fire while 2387 or 29% plan to buy a Nook Tablet. One of the other categories was “I don’t care, i-Pad all the way” which had 1088  or 13% respondents answering.

Supply chain issues

Susquehanna chip analyst Chris Caso recently wrote that supply chain research suggests that products of i-phone 4S may have been reduced  by 4 million units. However, Gene Munster of Piper Jaffray writes: “We believe that recent chatter around the i-Phone 4S product is off base.”

Despite facing increased competition for the i-Phone and potential production-supply issues, Apple’s 4S i-Phones have been selling well in North America and Europe. There are new published reports about the 4S i-Phone selling out in Hong Kong.

And Morgan Stanley’s AlphaWise survey found that only 5 percent of Chinese users have an Apple computer, however, 21 percent want to purchase one as their next computer.

Over the past five years, Apple’s stock price has increased 350%.



About Johnathan Schweitzer 1615 Articles
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