- Company has seen more than $40 billion market cap wiped out
- Investors worried by reports of waning demand for key product
Apple Inc.’s investors are spooked.
The shares ended the day below $100 for the first time Thursday since October 2014 amid concerns that demand is waning for iPhones, the most critical piece of the company’s business. The stock’s steady drop in recent weeks coincides with analyst and media reports indicating that Apple has cut back production of new handsets within its supply chain to accommodate slowing sales.
More than 60 percent of Apple’s revenue comes from the iPhone so any sign of weakness for the product causes concern among investors. The company’s reliance on the handset has only increased over the past year, as sales of the iPad have declined and the Apple Watch has yet to become a mainstream hit.
The stock fell 4.2 percent to $96.45 in New York. Apple, the world’s most valuable company, has lost about $52 billion in market capitalization this year.
"It’s a cause for concern," says Jack Ablin, the chief investment officer at BMO Harris Bank, which owns Apple shares. Even with the slide, he said Apple is still a good value. "It’s been a phenomenal growth story and we’re hoping the growth will continue."
Apple, which reports financial results for the holiday quarter on Jan. 26, has fallen 18 percent in the last month. Analysts at UBS and RBC Capital Markets lowered their estimates for iPhone sales Thursday, following similar moves by Morgan Stanley, Credit Suisse, JPMorgan and Drexel Hamilton.
Gene Munster, an analyst with Piper Jaffray Cos., who has followed Apple for more than a decade, said the steepness of the stock’s decline has surprised him. The reports coming out about Apple’s supply-chain have created an element of confusion among investors, who may be choosing to sell in the absence of good information.
"Investors can’t operate in an unknown environment, which is what’s going on here," he said. The stock will begin to rally after Apple’s next earnings report because it will give more clarity on the company’s position, he said.
Apple hasn’t commented publicly about the reports or given any independent numbers on the iPhone.
Analysts attribute the iPhone slowdown to the saturation in the broader smartphone market and less need for people to get new handsets. Apple also is in a period of its typical business cycle before it releases a newly designed iPhone, which usually rolls out around September. Cupertino, California-based Apple faced similar pressure from investors in 2014 before the debut of the bigger-screen iPhone 6 and 6 Plus.
The question investors are asking themselves is whether this time is different.