Apple Falls for Fifth Day on Concern of Carrier Subsidy Cut

April 16 (Bloomberg) -- Apple Inc. shares fell for a fifth day amid speculation that demand for the iPad may wane and that mobile-phone carriers will cut subsidies for the iPhone, eroding the profitability of Apple’s best-selling products. Bloomberg’s Alix Steel reports on Bloomberg Television’s “Taking Stock.” (Source: Bloomberg)

Apple Inc. (AAPL) shares fell for a fifth day amid speculation that demand for the iPad may wane and that mobile-phone carriers will cut subsidies for the iPhone, eroding the profitability of Apple’s best-selling products.

Verizon Wireless, a U.S. partner of Apple, said last week that it will begin charging customers $30 to upgrade to a new phone. The move suggests mobile-phone service providers may take other steps, including trimming subsidies, to keep sales of the iPhone from eating into their margins, said Walter Piecyk, an analyst at BTIG LLC in New York.

“Operators are trying to fight back against the impact that Apple is having on their business,” Piecyk, who last week reduced his rating on Apple to neutral from buy, said in an interview on Bloomberg TV’s “InBusiness With Margaret Brennan.”

Apple fell 4.2 percent, the largest decline since Oct. 19, after rising 49 percent this year before today. The shares closed at $580.13, the lowest price since March 13.

Analysts at Wedge Partners said in an April 13 research note that demand for the newest version of Apple’s iPad is beginning to wane. That means the tablet may miss analysts’ sales predictions when Apple reports earnings next week.

“Is Apple best name in tech? Yes,” Wedge Partners wrote in the report. “Have we seen the stock price plummet in the past, when expectations were out of whack with results? Yes. In our view, there is some risk to this happening again in the March quarter, and the result would likely be the stock coming back down to earth.”

‘Snowball Effect’

The slide also may be the result of U.S. Mac sales falling 5 percent from a year earlier, said Gene Munster, an analyst at Piper Jaffray Cos. That would be a worse performance than expected, he said. Apple reports its results after U.S. markets close on April 24.

Apple, based in Cupertino, California, has added $400 billion in market value since 2008, making it the world’s most valuable company. Today’s drop took about $23 billion off Apple’s market value.

“These stocks don’t just go straight up,” said Shaw Wu, an analyst at Sterne Agee & Leach Inc. After such a big increase over the past several months, investors have quicker triggers to sell if the stock dips, he said. “There is a little bit of snowball effect,” Wu said.

‘We’re Sellers’

Apple’s slide may continue in the next few days because it’s trading above its typical trend line, according to Carter Braxton Worth, a technical analyst at Oppenheimer & Co. “Bottom line: We’re sellers,” Worth said in a report.

Nasdaq OMX Group Inc.’s decision late on April 13 to adjust the Nasdaq-100 Index may also be driving Apple down, according to Dave Lutz, head of ETF trading and strategy at Stifel Nicolaus & Co.

First Solar Inc. was replaced with Texas Instruments Inc. in the Nasdaq-100 Index, the basis for this year’s fifth-most- traded U.S. exchange-traded fund. Because Texas Instruments has a market capitalization that’s about 20 times larger than First Solar’s, other stocks in the index are likely to see their proportion shrink, Baltimore-based Lutz said.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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