Advertisement
U.S. markets open in 4 hours 13 minutes
  • S&P Futures

    5,208.75
    -6.00 (-0.12%)
     
  • Dow Futures

    39,195.00
    -28.00 (-0.07%)
     
  • Nasdaq Futures

    18,204.00
    -27.50 (-0.15%)
     
  • Russell 2000 Futures

    2,043.90
    -5.90 (-0.29%)
     
  • Crude Oil

    82.62
    -0.10 (-0.12%)
     
  • Gold

    2,156.10
    -8.20 (-0.38%)
     
  • Silver

    25.10
    -0.16 (-0.65%)
     
  • EUR/USD

    1.0850
    -0.0027 (-0.25%)
     
  • 10-Yr Bond

    4.3400
    0.0000 (0.00%)
     
  • Vix

    14.44
    +0.11 (+0.77%)
     
  • dólar/libra

    1.2687
    -0.0041 (-0.32%)
     
  • USD/JPY

    150.4360
    +1.3380 (+0.90%)
     
  • Bitcoin USD

    63,738.96
    -4,028.27 (-5.94%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,719.07
    -3.48 (-0.05%)
     
  • Nikkei 225

    40,003.60
    +263.20 (+0.66%)
     

Apple shares slump: 4 factors behind the fall

For Apple, the hits just keep on coming. Unfortunately, they're not the kid of "hits" people are accustomed to but hits to the company's stock.

At Tuesday's intraday low, Apple shares were down 14% from the April 28 high of $134.46 and heading for its fifth-straight daily loss and tenth in past 11 trading days. More importantly from a technical perspective, Apple stock has fallen below its 200-day moving average of just below $121, and done so on heavy volume.

Apple 6 month chart
Apple 6 month chart



Two caveats. First, Apple is an incredibly profitable company and its stock remains relatively cheap based on pretty much any valuation metric. Second, stocks don't need a "reason" to fall and Apple may merely be in a consolidation phase after a phenomenal 2-year run that saw the stock appreciate nearly 75% vs. a mere 24% gain for the S&P 500. Apple's performance over the past 5- and 10-year periods is even more extraordinary and this "correction" may prove to be yet another buying opportunity.

Thus far, analysts are taking a "remain calm, all is well" view of the recent price action. As seen in the chart below, price targets for Apple have been steady around $146-147 for the past four months and still very few "sell" ratings -- 4% which is unchanged over the past year, according to Factset. Apple has certainly earned the "trust" of analysts and investors but the unanimity of option could be a negative contrarian signal; if 'everyone' is already bullish on Apple, who is going to buy more?

Apple price targets are steady.
Apple price targets are steady.

Here then, are four commonly cited triggers for Apple's recent dip:

  • All About China: A slowing economy and slumping stock market have raised concerns about Apple's prospects in China. Reports this week the iPhone's market share slipped to number three in the second quarter (behind Xiaomi and Huawei) vs. the top slot in the first quarter added to those concerns. On the company's third-quarter conference call last month, CEO Tim Cook reiterated a predication China will be "Apple’s largest market at some point in the future" and said the company "remain(s) extremely bullish" on its prospects there. "We’re not changing anything," he said, suggesting concerns about the stock market's "volatility" were overdone. "We have the pedal to the metal on getting to 40 stores mid next year."

  •  The Next Big Thing? “We believe that the possibilities for Apple Watch are enormous,” Cook said on the conference call. But the lack of detail led to speculation sales are disappointing, further fueled by reports that Facebook hasn't developed an app for the Apple Watch and that Apple will sell it in Best Buy, starting this month. Earlier this week, Advanced Semiconductor Engineering (ASE), a key supplier, said it didn't reach its "break-even volume" of 2 million units in the second quarter, leading Bernstein Research analyst Mark Li to lower his annual forecast for ASE and further fueling concern about the pace of Apple Watch sales. Be it the watch, Apple TV, home security, cars or some other initiative, investors are hungry for Apple to unveil another product to make the company less dependent on the iPhone, which accounted for nearly 74% of third-quarter revenue.

  • The Law of Large Numbers: In its fiscal third quarter, the company reported revenue of $49.6 billion and year-over-year growth of 33%, the fastest since 2012, while earnings per share jumped a whopping 45%. Apple continues to astound investors with its growth rates, which would be good for a speculative small-cap tech or biotech stock. The fact Apple is doing it as the world's largest market-cap is mind-boggling and unprecedented, raising a nagging concern that it can't last much longer.

  • The Dow Curse: As I wrote back in March when Apple was added to the Dow, companies tend to outperform in the weeks leading up to and immediately following including in the hallowed index, but underperform thereafter. In 32 of 50 Dow changes from 1928 to 2005, the deleted Dow stock (AT&T in this case) outperformed the added name, and the portfolio of stocks removed gained 19% over next 250 trading days vs. a 3% gain for stocks added, according to a 2005 academic study by economists at Pomona College. Recent history suggests the DJIA's overlords tend to add stocks when they're peaking, and occasionally before big falls. Notable examples include Intel and Microsoft, added to the Dow in November 1999, and Bank of America, which was added in February 2008.


Apple has had several corrections of 10% or more during its explosive growth over the past 5- and 10-year periods, as noted above. That should give shareholders comfort the current selloff will be short-lived and, potentially, a buying opportunity. As Michael Santoli notes in the accompanying video, Apple's business prospects haven't changed dramatically since its April high, certainly not enough to justify the rapid selloff. (He also notes, correctly, that Apple hasn't been a market bellwether in recent years, despite its market-cap. The stock often rallies when the S&P is falling, and vice versa so don't let The Drudge Report scare you about Apple triggering a broader market rout.)

But discretion being the better part of valor, let's remember Apple shares fell nearly 50% from its peak in September 2012 to its trough in April 2013. In that case, the bears were correct and the second generation iPhone 4 (the 4S) upgrade cycle was less exciting and less profitable, as my colleague Aaron Pressman notes. Maybe investors are fearing a repeat of that dour performance ahead of the 6S upgrade cycle, coming as soon as next month according to the ever-busy Apple rumor mill.

Aaron Task is Editor-at-Large of Yahoo Finance. You can follow him on Twitter at @aarontask or email him at atask@yahoo-inc.com.

Advertisement