Apple Becomes the Dow's Worst Performer

Apple Sees 1st Quarterly Revenue Drop in More Than Decade
  • Stock loses more than $40 billion in market cap after earnings
  • Apple's decline latest inclusion misstep for investors

Apple Inc.’s fourth post-earnings plunge of the last five quarters has handed the iPhone maker a distinction it could do without, making it the Dow Jones Industrial Average’s worst performer since it entered the gauge a year ago.

The decline in Apple, hovering at almost 6 percent, extended its loss since being added to the 120-year-old stock measure to 23 percent. That eclipses a 19 percent drop for American Express Co. since March 18, 2015.

The timing of the Apple’s addition and its subsequent decline continues a frustrating pattern for owners of Dow stocks, said Richard Moroney of Horizon Investment Services LLC in Hammond, Indiana. “By the time they put a company in, sentiment toward the stock is already pretty bullish and sometimes that coincides with the bloom coming off the rose.”

Weakness upon entering the Dow is nothing new. Since 1999, 16 stocks have been added, returning a median 0.8 percent in their first 12 months of membership. That gain was about 8 percentage points worse than the rest of the market over the comparable period.

Apple’s year-to-date decline extended to more than 6 percent, pushing its price-earnings ratio to roughly half the Nasdaq 100 Index’s 22. The drop will extend the Cupertino, California-based company’s decrease since its February 2015 record to almost 26 percent, leaving it firmly ensconced in bear market territory.

Apple’s $2 billion of 4.375 percent bonds due 2025 dropped to 103.9 cents on the dollar from 105.5 cents Tuesday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The notes were trading as high as 108.8 cents on April 20.

The fall in Apple’s stock ranks among the worst single-day declines for the shares since the bull market began. The only time they fell more since 2009 were an 8 percent drop after reporting results in January 2014 and a 12 percent plummet in January 2013.

Apple reported its first quarterly revenue contraction in more than a decade on Tuesday and forecast another decline in its next results. The share plunge erases $42 billion in the company’s total value -- more than the market capitalization for about 80 percent of the Standard & Poor’s 500 index’s constituents.

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While Apple may be at a crossroads and in need of a way to revive revenue growth, few would argue that it doesn’t belong in the Dow, Moroney said. “The keepers of the Dow would say they’re taking a long-term view and they still expect Apple to be a leading company,” he said.

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