updated 11:08 pm EST, Wed December 5, 2012
China Mobile issues, sales slowdown rumors behind fall
Apple's stock took an unexpected beating in the market on Wednesday, losing 6.43 percent of its value and shedding some $35 billion in market capitalization after the worst single-day drop in price in almost four years. AAPL lost just over $37 per share on a combination of worries, rumors and unsubstantiated reports. The loss was so dramatic that it accounted for the whole of NASDAQ's 1.1 percent drop for the day, even while the Dow and other indexes rose slightly. The iPad maker is now hovering just over $508 billion in valuation.
Causes for the dramatic drop including a combination of speculation that increased Android-based competition may hurt iOS device sales -- even though there is presently no evidence of this -- along with a rumor that China Mobile will ultimately not do a deal for the iPhone, instead going with Windows 8 Phone devices. Notoriously uneven source DigiTimes is also reporting that Apple may have cut orders for parts for the March quarter of 2013, which could reflect softening demand after Christmas but could also be a perfectly normal quarterly change following a huge build-up in product for Apple's ambitious multi-country expansion of the iPhone and iPad lines.
Another factor that could be affecting the drop is the profit-taking many investors are grabbing ahead of an expected increase in capital-gains tax rates in the new year. AAPL, as one of very few tech stocks that has seen dramatic rises in price over the past couple of years, has profited long-term holders extremely well, and many -- including a number of Apple executives -- saw an opportunity to cash out those gains at the lowest tax rate that will likely ever be offered again.
Despite some worries that the company is polishing its existing product categories rather than creating innovative new products (ignoring the fact that Apple existed for more than 20 years on the strength of a single product line), the drop is hard to explain in the face of solid fundamentals, a continuing high demand for its existing products and a P/E ratio of 12 (or only 9.5 if Apple's enormous cash hoard isn't counted). The company is widely expected to have a near-record or record holiday quarter again this year, as it did last year, and the current product lineup is universally considered strong. Apple has even managed to snag a little bit of marketshare away from Android, despite having only a handful of iOS devices to compete against more than 400 Android-running models, many of which are sub-smartphone budget units with minimal feature sets aimed at low-end cellular customers.
If the stock is bottoming out, the dramatically lower price -- currently down more than $170 off its late-September high point -- represents a tremendous buying opportunity for investors, despite the news that COR Clearing will double margin requirements on AAPL to 60 percent, which may cause some small-time investors to dump their holdings.