The decline has followed a sequence of seemingly unrelated
events, including an overhaul of Apple's product line and a rare
shake-up in Apple's senior ranks.
Autumn is traditionally the time of year when people start
snapping up Apple products. It is also when investors, in
anticipation of another blockbuster holiday season from the company,
do the same with Apple shares.
But this year, even though the iPhones and iPads that Apple
produces do not seem to have lost any of their allure for holiday
shoppers, Apple shares seem headed for the discount rack.
On Wednesday, the shares slid 3.8 percent and fell an additional
2.1 percent by midday Thursday. They outpaced a broader decline in
the stock market set off by investors' uncertainty about how the
outcome of the presidential election would affect taxes and consumer
demand for the types of products Apple sells.
During the campaign, President Barack Obama proposed increasing
capital gains tax rates for people earning more than $250,000 to 20
percent from the existing rate of 15 percent, and his re-election
Tuesday night may have prompted some investors to unload shares in
anticipation of a broader sell-off in stocks before a tax increase,
analysts said.
Owners of Apple stock would have good reason to fear higher taxes
on capital gains. The shares have appreciated mightily since January
2005, when they were about $35 apiece; they began this year at $409
and peaked at more than $700 in late September. The drop on
Wednesday only added to what has been a grim few weeks for the
shares, which have fallen more than 20 percent from that peak, to
$558 on Wednesday.
The decline has followed a sequence of seemingly unrelated
events, including a broader-than-normal overhaul of its product line
that is expected to hurt profit margins in the near term, and a rare
shake-up in Apple's senior ranks. "It has just been wave after wave
of bad news," said Gene Munster, an analyst at the investment bank
Piper Jaffray.
The events also do little to diminish the questions reflecting
longer-term concerns with which investors pepper analysts like Mr.
Munster. How much bigger can Apple -- with a $548 billion market
value, the biggest of any company -- get? Won't Apple soon run out
of buyers for iPhones, iPads and Macs?
Those concerns have been among the biggest reasons Apple's stock
has long traded at a discount, strange as that may sound to its
peers. Apple's forward price-to-earnings ratio -- the value of the
company's stock divided by its expected earnings per share for the
coming year -- is less than 10.
That figure is 14 for Google, 32 for Facebook and 131 for
Amazon.Steve Dowling, a spokesman for Apple, said the company
generally did not comment on its share price.
Apple executives have said they still see huge opportunities for
the company, and it is still growing at a remarkable clip for a
company its size. During its past financial year, which ended Sept.
29, Apple's revenue jumped 45 percent, to $156.5 billion, and its
profit rose 61 percent, to $41.7 billion.
While Apple's most recent financial report was mostly in line
with analysts' forecasts, the company warned that its profit margin
would probably decline in the holiday quarter because of a broad
refreshing of the company's iPad, iMac and MacBook laptop lines.
Apple products often cost more to make during their first months
on the market, but those costs decline as the process becomes more
efficient and volumes increase. The company has said its new iPad
Mini will be among those products with low profit margins, raising
concerns that Apple will make less money as it competes in lower-
priced segments of the mobile market.
Apple's worrisome financial report came just days before it
announced the departure of Scott Forstall, the head of its mobile
software development, in a move that it said was aimed at increasing
collaboration between departments at the company. Apple split the
responsibilities of Mr. Forstall, who was a divisive figure at the
company, among an array of other Apple executives.
Then late last week, the research firm International Data Corp.
reported that 75 percent of smartphones shipped in the third quarter
had been Android phones. Android is the main rival to Apple in
mobile software.
A year earlier, Google, the maker of Android software, had market
share of 57.5 percent. The iPhone's share rose at a much slower
pace, to 14.9 percent of shipments from 13.8 percent, I.D.C.
estimated.
But Apple is still making huge profits from the mobile market,
far more than Google is. Even with the recent decline in its shares,
Apple's stock is still up 35 percent for the year.
