Apple Drops Below $500 for First Time Since February

Apple Inc. (AAPL) shares dropped below $500 for the first time since February after Citigroup Inc. (C) reduced its rating for the stock on concern that demand for the iPhone 5 is slowing.

Apple fell to $499 at 6:55 a.m. New York time in premarket trading after declining 3.8 percent to $509.79 in Nasdaq Stock Market trading on Dec. 14. The Cupertino, California-based company’s stock has lost 27 percent from a closing peak of $702.10 on Sept. 19.

The company’s Asian suppliers have been reporting cuts in orders, which raises questions about the iPhone 5’s strength, Citigroup said in a note. The bank reduced Apple to neutral from buy and cut its price target to $575 from $675. Apple’s shares are heading toward their third monthly drop as the company faces competition from Samsung Electronics Co. (005930) and Nokia (NOK1V) Oyj and had trouble meeting initial demand for the iPhone 5.

Citigroup joins at least four other banks in cutting Apple price estimates this month, according to data compiled by Bloomberg. UBS AG (UBSN) cut its price estimate for the stock to $700 from $780 on Dec. 14, citing concern that growth may slow for the iPhone and iPad. Apple component suppliers received order cuts as recently as last week, according to Peter Misek, an analyst at Jefferies & Co. who cut his estimate for the shares to $800 from $900 last week.

Asian Suppliers

Li Yue, chief executive officer of world’s largest mobile company China Mobile Ltd. (941), said this month that he won’t add the newest iPhone to his network until he’s offered a better deal. Nokia said Dec. 5 that China Mobile would sell its Lumia 920T smartphone as it expands in Europe and Asia.

The prospect of weak iPhone 5 shipments creates an earnings risk for Apple’s supply chain, and shares of those companies may come under selling pressure, Citigroup said.

Share declines in Apple’s Asian suppliers ended the region’s benchmark index’s longest rally since 2004. The MSCI Asia Pacific Index (MXAP) dropped .09 percent to 127.32 at 8:49 p.m. in Tokyo, capping a 12-day rally.

Hon Hai Precision, which assembles the iPhone, lost 4.7 percent to NT$87.20. Foxconn Technology Co. (2354), which makes iPhone casings, dropped 4.7 percent to NT$89.70. Largan Precision Co., which makes lenses for Apple, sank 5.5 percent to NT$741 in Taipei.

To contact the reporter on this story: Amy Thomson in London at athomson6@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

6:03

Dec. 11 (Bloomberg) -- A.B. Mendez, a strategist at Knight PE Source, talks about the outlook for Apple Inc. He speaks with Tom Keene, Sara Eisen and Scarlet Fu on Bloomberg Television's "Surveillance." Robert Litan, director of research for Bloomberg Government, also speaks. (Source: Bloomberg)