Apple shares fell 2.1% Thursday to close at $525.62.(Photo: Kimihiro Hoshino, AFP/Getty Images)
Apple stock fell to its lowest level since February as investors
continued dumping shares of the company, no longer perceived as being
infallible or worthy of being priced for perfection.
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.
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
"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."
Analysts say the stock is coming under intense pressure now because of:
• Worry about changes coming with investment taxation. There's
a real risk that the tax rates on capital gains could rise next year
for many investors, so many are opting to sell winners now and lock in
current tax rates, says Jim Kelleher, analyst at Argus Research. Apple's
stock is still up 30% this year.
• Realization that losing its visionary founder isn't something to be ignored.
Following the death of founder Steve Jobs, Apple lost the taste-master
behind its products, Gundlach says, adding the stock could fall to $425
if it follows the pattern of other fallen highfliers.
Jobs' death, the company has made a series of foibles, including a
poorly received change in mapping software, and has suffered turnaround
in the management ranks, he says. It's also following competitors with
slightly changed products, such as the iPad Mini, he says.
• Profit compression.
The company's enviable profit margins are likely to decline as its
costs rise and it faces more competition, says Sameet Kanade of Northern
Securities. Consumers are also hitting "Apple fatigue" as they've
already bought numerous products from the company with increasingly
similar functionality, he says.
• A softening macroeconomy. 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,
Some investors and analysts, though, think the selling
is just temporary. "We see this as a buying opportunity," says Brian
Colello of Morningstar.