If Apple’s market cap is giving you whiplash, don’t worry, you’re not alone. Just four months ago, Apple was breaking records with the highest market cap in U.S. history. Then the iPhone 5 was released and shares have been in a free fall ever since. Today, Apple shares dipped below $500 for the first time since February 2012, closing out Tuesday at $485.92. So if you owned Apple stock and were holding out for the big $800 mark, you might be a little upset today.
Breaking it down to the raw numbers, Apple shares have fallen 31% since its record high in September, and its market cap has shriveled from $663 billion to $457 billion—that’s $206 billion gone in four months, which, as one of our readers pointed out, is more than Yelp, Facebook, eBay, LinkedIn and Yahoo's market caps combined.
As analysts cut their price targets for Apple, shareholders are jumping ship. Analysts at Nomura Holdings are maintaining a neutral rating for Apple, but have cut their price targets to $530 from $660. Nomura analysts cite weaker than expected iPhone 5 sales and are anticipating $45 EPS for 2013 and $50 EPS, which is 7% and 13% below consensus, respectively.
Earlier this week, the Wall Street Journal ran a story claiming that Apple had reportedly cut orders for components due to weak demand. Orders for iPhone 5 screens were rumored to have been cut in half for the March quarter, but J.P. Morgan analysts say it’s all just noise.
“We believe the supply chain adjustments are ever-changing and we remain comfortable with our iPhone 5 estimates for Dec-Q and Mar-Q,” wrote Mark Moskowitz in a research note. He adds: “In our view, recent order cuts could suggest that the manufacturing yields are improving on the iPhone 5, and as a result, this could be another reason that Apple pulled back on excess orders of certain components.
J.P. Morgan analysts are anticipating iPhone 5 sales to reach 25 million units next quarter.
Many people have also been speculating on the possibility of a new lower priced iPhone, which could have some strategic advantages, namely in regards to capturing more of the smartphone market and attracting new customers who will then be more likely to buy other Apple products. But it could also have some drawbacks, such as the potential for cannibalization of existing iPhones.
Analysts at Bernstein Research believe that the iPad mini cannibalization rates are high, but that the margin differential between the iPad mini and the original iPad are not all that different. The margin differential between a reduced priced iPhone and the full-priced iPhone, however, could be much more dramatic, potentially wiping out all the profitability of introducing such a device.
But Bernstein analysts who met with Tim Cook recently said they didn’t get the sense that a low-priced iPhone is on the horizon any time soon.
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