New York: Apple Inc's shares fell by as much as 12 per cent on Thursday, staging their biggest percentage drop in over four years and slicing more than $50 billion from the company's market value, as disappointing holiday-period iPhone sales reinforced fears it is losing its dominance in smartphones. Eighteen brokerages, including Barclays Capital, Mizuho Securities USA, Credit Suisse, and Raymond James cut their price targets on the stock of the world's biggest publicly traded company by an average $132 to $612.
Apple's shares slid to $450.66 at the open on the Nasdaq, before recouping some of their losses. The stock hit a peak close of $702.10 on September 19, valuing the company at $658 billion. Since then, it has lost about $225 billion, or 35 percent, of its in market value - or about the entire worth of Chevron Corp, the second biggest US oil company.
Jefferies & Co cut its rating on Apple's stock to "hold" from "buy" and slashed its share price target by $300 to $500. Jefferies analyst Peter Misek, who has previously raised red flags about Apple cutting orders to suppliers, said the iPhone slowdown was "real and material" and here to stay. "We think Apple is losing the screen-size wars," Misek said, noting that demand was moving away from the iPhone's 3.5-inch and 4-inch screens to screens of 5 inches offered by rivals such as Samsung Electronics Co Ltd, HTC Corp and Nokia Oyj.
Samsung, which is at the same time Apple's chief rival and biggest component supplier, overtook Apple as the biggest seller of smartphones in the third quarter, selling close to 500 handsets a minute. Apple said it shipped a record 47.8 million iPhones in the December quarter, but this was well below the average analyst forecast of 50 million units.
The company's margins were also hit, sliding to 38.6 per cent from 44.7 per cent a year earlier, partly because its iPad is cannibalising its high-margin Macintosh computers. Expectations heading into the results had been subdued by news of possible production cutbacks, putting pressure on Chief Executive Tim Cook to keep up the company's momentum.
New products needed
Analysts said Apple's growth would hinge on new products, but added that a new launch wasn't on the horizon. "To re-accelerate growth, Apple likely needs to launch new products, yet few seem likely before June," Nomura's Stuart Jeffrey said. The company has been long rumored to be working on a television but has so far deflected questions on its existence. Apple hasn't launched a new line of products in almost three years, apart from a smaller version of the iPad.
Some analysts questioned the company's strategy of betting its fortunes on one phone, while others said a cheaper iPhone could arrest losses of market share. "Apple's modus operandi to date has been to cream the high-end off each market, but as the company's grown it may now need to target more of the mainstream," Evercore Partners analysts said.
Up to Wednesday, 24 analysts had lowered their price targets since October when Apple reported its fourth-quarter results, according to Thomson Reuters data. Apple shares were down 10.3 per cent at $460.66 in late morning trading. The disappointing results also hit shares of some of Apple's suppliers. Cirrus Logic Inc, which gets nearly 80 per cent of its revenue from Apple, fell 10 per cent while shares of Skyworks Solutions Inc, which depends on Apple for about a quarter of its revenue, slipped 5 per cent.
Cirrus makes audio-related chips while Skyworks provides power amplifiers for Apple products. Apple is the lowest ranked stock among the marquee technology firms in the United States based on the change in analyst sentiment, or Analysts Revision Model (ARM), according to StarMine.
Apple's global ARM score of 10 is well below Google Inc's 34 and Microsoft Corp's 19 out of a possible 100. Nokia and Samsung have scores of 82 and 89, respectively. Research in Motion Ltd has a perfect score of 100, according to the model, which measures analysts' revision of key indicators such as earnings and revenue estimates and changes to their ratings.
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