News Column

Apple Shares Continue Freefall as Analysts Debate iPhone Demand

Jan. 15, 2013

Jeremy C. Owens, San Jose Mercury News

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Apple's (AAPL) four-month stock slide from higher than $700 a share to less than $500 a share continued Tuesday morning, as the tech giant experienced its second consecutive day of heavy losses after reports of weaker-than-expected iPhone demand that brought scoffs from many analysts.

Apple shares fell as low as $483.80 in Tuesday's morning session, which ended at 9 a.m. Pacific time with the stock trading at $484.10, a decline of $17.65, or 3.5 percent. For the second consecutive day, Apple faced the prospect of closing lower than $500 for the first time since Feb. 15, as Monday's 3.6 percent decline left shares barely above that mark.

Apple has been in a freefall since the company introduced the latest iteration of its popular smartphone, the iPhone 5. On the day the device launched in the United States, Sept. 21, Apple hit an all-time high of $705.07; in the long slide from that mark, Apple declined 28.8 percent through Monday's session.

The latest bout of weakness seems to be a reaction to reports that the Cupertino company has cut back on components for the iPhone 5 because demand for the device from consumers has not lived up to expectations. The Wall Street Journal and Japanese news source Nikkei reported Monday morning that Apple had slashed its component orders in half because of weak demand.

Some financial analysts doubt the report, however: Sterne Agee analyst Shaw Wu wrote in a note that "As far as we can tell, iPhone 5 demand remains robust," while Baird analyst William Power said "most demand indicators remain favorable."

Wu suggested that the cut in component orders could be attributed to improvements in Apple's production, as fewer components yield a greater number of iPhones. JPMorgan analyst Mark Moskowitz agrees, telling AppleInsider that "order cuts are a direct result of manufacturing yields improving following the fast-and-furious product rollouts of the iPhone 5 as well as new iPads and Macs."

Global Equities analyst Trip Chowdhry offered a different explanation, writing that Apple is likely switching screen technology in future iPhones, and therefore needs less of their current supply.

Some analysts agree that demand for Apple's signature smartphone -- its biggest profit provider -- is weak. Nomura analysts slashed their price target on the stock from $660 to $530 Tuesday and reduced their estimates for iPhone sales in the holiday-shopping quarter, as well as the current quarter and full year. The analysts explained that their checks on Apple's business show "weaker-than-expected sales of the iPhone 5."

Apple will announce iPhone sales for the holiday quarter, as well as financial information for its fiscal first quarter, in an earnings report on Jan. 23.

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Source: (c)2013 San Jose Mercury News (San Jose, Calif.) Distributed by MCT Information Services


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