Apple at $400: Share price sinks to new lows, but does it matter?

Apple at $400: Share price sinks to new lows, but does it matter?

Summary: A weaker than expected outlook for the third quarter is hitting Apple's share price hard. Analysts are no longer looking at the firm's potential to hit $1,000 a share price, but instead wondering how low it can go.

TOPICS: Apple, iPhone

Apple's share price has plummeted below the $400 a share mark earlier today, after a recent spate of negative analyst opinion over its coming fiscal third quarter outlook.

In late morning trading, Apple dipped below the December 30, 2011 mark, close more 5 percent down from its opening price of $425, but began to stabilize out again in early afternoon trading.

Here's what it looked like:

Screen Shot 2013-04-17 at 13.43.35
$AAPL trading close to 5 percent down during midday trading. (Image: Google Finance)

In just seven months since its peak at $700 a share mark in mid-September 2012, Apple has lost more than 40 percent of its market cap. It even reached a point where by any time Apple chief executive Tim Cook said anything, the company's price would drop during or immediately after.

Earlier this week, Piper Jaffray analyst and part of the Apple faithful Gene Munster cut his estimates and price targets for the Cupertino, Calif.-based technology giant.

Since then, Cirrus Logic cited weaker than expected revenue ahead of Apple's company's second quarter earnings next week. The firm makes analog and audio chips for the iPhone and iPad. As a result of its poor revenue forecast, it suggested that Apple was cutting supplier demand for its iOS-powered devices.

Consumer demand is shrinking. Of course it is. It's a by-product of a popular device that everyone wants, or wanted at the time. We just don't know how much yet.

For the current March quarter, Citi analysts expect Apple will sell 1 million fewer iPhones than expected, and during the June quarter the consensus is down to 25 million from 32 million. 

The market is already saturated with iPhones and iPads, but also the product launch cycle is about to kick back into gear. ZDNet's Adrian Kingsley-Hughes noted that there are more than 320 million iPhones in the world already. Compare this to the iPad, where the profit margin is lower than the iPhone, and there are still more than 120 million iPads on the market.

Not everyone wants to jump on the new shiny rectangle that heads out the door by the technology giant. And those that do don't immediately jump. Many, in fact, hold onto their devices for multiple release cycles and upgrade from two devices back — say the iPhone 4, skip the iPhone 4S, and buy the iPhone 5.

But the figure of Apple's share price could be more overblown than we think. Here's why.

Apple's stock was hammered during its first quarter earnings report in January. It fell from around $520 to $440 in the matter of hours. The trouble is for Apple watchers is that the company reported record iPhone sales, booming profits and huge revenues.

But because the company missed expectations made by analysts -- a jumbled figure of subjective analysis that doesn't actually determine anything -- Apple took a swift kick to the financial stones.

Apple will report its second quarter earnings on April 23.

Corrected headline at 14:15 a.m. ET.

Topics: Apple, iPhone

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  • Apple at $400: Share price sinks to new lows, but does it matter?

    Of course it matters. Just think of all those people who bought at $700 and were told to do so by the same guy who is cutting the forecast now. I'm surprised Gene Munster made such a move since he's been desperately trying to hype the stock back up so he could break even. Even he knows when to cut his losses.

    I don't think there was anyone who didn't see this bubble popping except those living in the RDF.
    • Yeah, but......

      it is not exactly a bubble when the PE is around 10.
      • Predictable, Foxconn & Sharp posted loses yesterday

        That was the huge cue on the sell off.

        IOs may have the largest market share in North America. Though its losing maretkshare everywhere else! There is a limit on how many phones you can sell on a single market. North America is saturated!

        So.. until a new revolution comes along (15 ~ 20 years or so). Apple's appeal has started to lose its luster.
        • The stock market is like a woman...

          All about emotions and nothing is rational. Some people say that men just don't understand women. No, they do, they just haven't figured out the right analogy. If you tell a guy that a woman is exactly like the stock market, they suddenly understand women. But that still doesn't get them any closer to getting laid... Oh Well.
      • PE is Good, Is the Market Predicting a Fall?

        It seems like the market doesn't think earning will continue to be so good. So far they are wrong, but I kind of agree with the market - they are just coasting.
        Schoolboy Bob
    • True. I never thought if it that way.

      Before, I was going to say "No. Wallstreet has a habit of going for false information, hyping stuff up and then letting it drop. See facebook's stock. Hell, there stock shouldn't have even hit $700 (it grew way to fast, and people noticed)"

      But now I start thinking of all of the innocent people who were screwed out of there money by bankers.
    • Re: Just think of all those people who bought at $700

      I have no sympathy for those people. They are responsible for the financial troubles in the world. They deserve to lose and lose big.

      Why someone things this impacts Apple in any way is beyond me.
      • But it *will* impact Apple

        A dropping stock price will put pressure on the company leadership. It does for every public company.

        This will often lead to changes in company plans, e.g. moving release dates forward or back, or rushing products to market, or cancelling them, or a thousand other business decisions that might have been different if the board could operate in a vaccuum from the market's sentiments.

        Once you're publically listed, you don't own the company anymore. Your share price subtly (and sometimes overtly) affects everything you do. I wouldn't be a good CEO of a large company - that sharemarket pressure would really drive me mad. Steve jobs was pretty good at resisting it, but I don't know if Cook can ignore it as well.
  • Apple's biggest challenge ...

    ... is that there's only so much market for its products and it only has a few products to market.

    When 80% of a company's revenues come from just one product with the remaining 20% comprising 4-5 other products, and when the markets the company operates in starts to saturate, the drop in sales of the company's flagship product will result in a rapid decline in its revenues and profits.

    This is basic economics 101.

    And it's also likely a very large contributor to Apple's precipitous stock price collapse.

    Apple had a few years of groundbreak growth by introducing startlingly innovative products starting with the iPod, then the iPhone, followed by the iPad. They then had a couple of release cycles of significant improvement which saw the introduction of the iPad v2 and the iPhone 4.

    And they enjoyed all of the mobile computing innovation with little/no serious competition.

    And while this mobile revolution was going on, Apple's MacBook and MacBook Air also improved Apple's Mac sales considerably, but they account for a vanishingly small portion of their revenue.

    However, Apple's last 3-4 product release cycles have introduced very little that's genuinely new and innovative other than a smaller iPad and a slightly differently shaped iPhone. They did also introduce the Retina-screened MacBooks but their Mac sales declined from 5.1M units to 4.1M units YOY. iPod sales are also decreasing.

    And on top of this, there's some serious competition growing from the Android camp and increasingly from the Microsoft ecosystem too, nascent though it may be right now.

    I believe it's greatly worrying institutional investors that Apple's innovation-train appears to have ground to a halt and that they are now being out-innovated by the likes of Samsung.

    Unless Apple starts introducing truly groundbreaking products to bolster its product & service breadth, they could well face some very serious issues in the coming couple of years.
    • Whatever

      Your post is insulting. "Basics 101"??? The stock market is irrational. Apple may get 80% of revenues from one product but that one product, the iPhone still has robust demand and as of the last quarter reported record revenues and profits, so much for your argument for "Basics 101".
  • Over Hyped

    Apple is Apple, the same Apple of the 90's with fan-boi's making a religion out of it. They had some good innovation that has stalled and now the people who look at stocks realize the bag of tricks is empty. While I personally hate my iPhone, given the usefulness of PDA types devices in the past, it's not hard to see how the convergence of the cell phone, PDA, and MP3 player would be successful. One hard reality that people have to come to grips with is that the success of the iPod was on the backs of pirated content. There was a real value proposition to the consumer when given the option to not pay $20 for a CD, and subsequently DVDs. Now that these are almost expected, there is less of a value add to use the expensive device.
  • To many, It does matter.

    If it drops to 399 a share, I think we'll see the last of Tim Cook, so I think it matters to him, and to investors.

    It also matters to people here who like to post Market Caps.
    William Farrel
    • But the real question... what has to happen before you and Loverrock take your shill drivel somewhere else. Couldn't you get on the global warming blogs or something.
      • Shill drivel? The question was asked, and I answered

        or do you honestly think the fact that Apple's stock price going from $700 a share to $392 dollar a share is of zero concern to investors, and Tim Cook?

        Or do you think they'll just say "Oh well, time to cut our losses and invest some more money into Apple. BTW - Tim's doing a GREAT job for us!"

        I think it's very important for them.

        As for the market cap posters, just go back to Sept 2012 and count the number of people posting Apple's market cap here on ZDNet, to see who I'm talking about.
        William Farrel
  • Bubble stock

    Apple stock was probably a bubble. Its coming back to earth is no surprise. I wouldn't read all that much into it, though. Apple is no Facebook, struggling to come up with a business model that might justify any stock valuation whatsoever. The company sells a gazillion devices a month and will continue to do so for the forseeable future.
  • Unrealistic Expectations

    "But because the company missed expectations made by analysts -- a jumbled figure of subjective analysis that doesn't actually determine anything -- Apple took a swift kick to the financial stones."

    It's usually the so-called "expert" analysts, not Apple, that make wild predictions about Apple's near-term fortunes and then they dump on Apple when it doesn't or cannot meet them.

    Predict/guess unrealistic Apple sales, then slam it when they are not met.

    I sometimes wonder how the stock market and economy as a whole ever survives such asinine goings on... not to mention suspected or suspicious stock price manipulation that occurs at times.
    • Where was this outrage when aapl hit $700?

      Why weren't you guys saying this as aapl was rising? You realise that the ONLY reason aapl ever hit $700 was because of, and I quote:
      "the so-called "expert" analysts, not Apple, that make wild predictions about Apple's near-term fortunes"

      aapl was a $700 share but apple was not. As soon as the experts realized they made a mistake buying at $700, they brought the price down to something closer to what apple is worth.

      Considering how apple isn't showing any signs of innovation, I'm expecting aapl to fall even further.
      • Re: Why weren't you guys

        Who made you think we care?
      • Who said we didn't

        The stock market is just big-time gambling with very little logic. I didn't care when their stock was around $13 a share (yes, I remember that) and I don't care if it goes to $1,000 a share. Only the stooge patrol (you, Loverrock, Owlllll, and Farell), however, are negative about Apple no matter what happens to the company. If the stock goes up or down, if the company has a product that turns lead to gold, produces drinking water from air, cure does not matter to you three. So we get it. Now go get a job. Better yet, start a company that actually tries to build something so that we can observe your skill.
  • I predicted this downfall when Analysts were saying it will reach $1000

    Those familiar with financial markets already know that the graph won't go in one direction all the time. iOS is a one hit wonder, and lack substance and is hugely over-priced. With no enterprise presence, Apple market cap will continue to fall. Surface and Win 8 tablets will destroy the ipad enterprise market. Consumers will be buying the smaller iPad.

    OSX lacks touch capabilities while Windows 8 shines from 7 inch to 120 inch screens. Overall Apple outlook is bleak