SAN FRANCISCO – This holiday season is shaping up to be a record-breaking period for Apple as shoppers snap up iPhones and iPads. So, why is the worlds most valuable company losing its luster with investors?
Apple began selling the iPhone 5 on Sept. 21, the same day the companys stock hit an all-time peak of $705.07 a share. Since then, the stock has plunged nearly 25 percent, trimming the companys market value by more than $150 billion. On Friday, the stock fell almost 3 percent and closed at $533.25.
The sell-off has had broad effect. It has reached beyond Apples own stockholders because the company is the largest component in the Standard & Poors 500 and Nasdaq composite index – two benchmarks that are tracked by widely held mutual funds and exchange traded funds.
Apple constitutes 4 percent of the S&P 500 and nearly 12 percent of the Nasdaq, according to FactSet. The Nasdaq has shed 6 percent since Apples stock price peaked while the S&P 500 has declined 3 percent, the same as the Dow Jones industrial average, which doesnt include Apple in its basket of 30 stocks.
Theres no consensus regarding the cause for Apples descent, but one thing is clear: There have been more investors eager to sell Apples stock than buy it in recent months, despite all the evidence indicating Apples products have never been more popular.
Here are three theories that seek to explain the recent downturn in Apples stock:
Theory: Competition Conundrum
Hypothesis: Apples grip on the growing mobile computing market is loosening amid a wave of cheaper alternatives to the iPhone and iPad.
The iPhones early lead in the smartphone market already has been surrendered to the more than 500 million devices running on the free Android software made by Google Inc. By comparison, as of the end of September, Apple had shipped 271 million iPhones since its 2007 debut.
Theory: Creativity Contraction
Hypothesis: Apple is running out of fresh ideas.
Since Apple co-founder Steve Jobs died 14 months ago after a long battle with cancer, the company has mostly been fine-tuning products that were created under his visionary leadership. The former CEOs hand-picked successor, Tim Cook, is well-respected, but some investors wonder if Apple can conjure up another revolutionary product.
Theory: Fiscal Cliff Factor
Hypothesis: Many longtime Apple shareholders are selling stock to lock in gains at a lower tax rate.
Under laws set to expire Dec. 31, profits on stocks owned for at least a year are taxed at a 15 percent rate – much less than the rate earned income is taxed at.