Duck and cover: Apple shares dip below $400

Shares are skirting the $400 line and are now the lowest they've been since January 2012

Apple shares have officially dropped below the $400 mark, which means it’s time for everyone to get into the bomb shelter. Shares mysteriously plunged 6% ($26) on Wednesday, skirting the $400 line and briefly dipping a toe into the $399 zone. Apple shares are now the lowest they've been since January 2012. Commence operation pandemonium.

The company isn’t even scheduled to reveal its earnings until early next week but investors are already panicking over the doom-and-gloom warnings from analysts. Notably, yesterday, Piper Jaffray analyst Gene Munster cut his price target to $688 from $788, citing concerns that Apple’s rumored cheap iPhone will cannibalize its higher end phones.

Specifically, Munster theorized in his report that for every three cheap iPhones sold (which he believes will sell for $300 sans contract), it will translate to one less higher priced iPhone sold. He believes Apple will sell 75 million cheap iPhones, which will account for 11% of the low-end market. But the result will be lower margins—36.6%, compared to last year, when Apple maintained 47.7% gross margins.

Consequently, June guidance will be lowered to $34 to $36 billion, while analysts will be expecting $39.6 billion.

He’s not the only analyst who believes Apple is having a dismal quarter. Citi, Jefferies, and BTIG analysts have all warned that Apple has a good chance of coming in below its own guidance this quarter. Earlier this month, Jefferies analyst Peter Misek warned that iPhone sales likely saw a drop in March due to consumer anticipation over Samsung’s new Galaxy S4.

BTIG’s Walter Piecyk actually upgraded Apple’s stock to a “buy” rating while simultaneously warning of a bad March quarter. Even though his price target is just $540 and he expects poor March earnings and even worse June earnings, he believes the long-term outlook is bright. Specifically, he said in a research note, he believes Apple will deliver a lower-priced iPhone by the end of the year, along with another mystery device that will generate an additional $5 billion in revenue. 

 Munster is also reassuring shareholders that the darkest hour is before dawn. Munster believes that while the June quarter is going to be even worse than the March quarter, Apple will have a strong second half of the year based on new products.

The cries and lamentations of analysts aside, there may be another reason why Apple shares are sinking. It appears that one of Apple’s suppliers, Cirrus Logic, announced earnings results that came in below expectations. Apple is one of Cirrus Logic’s largest customers. 

Image source: AllthingsD.com