Apple's Wall Street Winning Streak Hits a Pothole
Apr 18, 2012 5:00 AM PT
Apple's weeks-long roll on Wall Street went off the rails this week and last as share prices significantly dropped over a five-day period, jumping back to life Tuesday.
The stock dipped to US$580.13 at Monday's close, down 9.9 percent from its highest point of $644 on April 10. It was the fifth consecutive day of decline for the company. The Nasdaq fell 0.8 percent on Monday as well, partly due to the strain placed on it by Apple's decline.
By Tuesday's close, though, the stock had made its way back up over $600, restoring some faith in the electronics giant. Nearly half of the $50 billion Apple lost in market capitalization during the five-day slump had been restored.
Apple's quarterly report is due next week, at which time investors and analysts will get a better idea of the company's health in the market going forward, according to Hendi Susanto, analyst at Gabelli.
Why the Dip?
Besides the normally volatile nature of large tech stocks, Susanto said, there re a few theories about why this was such a rocky week for AAPL shares.
"There are a few pieces of speculation about the stock price today, and one is the iPad mini," Susanto told MacNewsWorld.
Various media outlets have reported on rumors from overseas suppliers about a tablet device sized somewhere between the iPhone and the iPad that could be making its way to consumers. A lower-priced tablet could put pressure on competitors by more closely resembling the smaller, lighter, cheaper Amazon Kindle in both size and possible price. Interest in the device was apparently piqued enough on Tuesday that it helped contribute to a rise for Apple in the market.
But the iPad mini would still have its limitations with developers and manufacturers, and Apple hasn't confirmed any rumors that such a product is even in production.
With or without an iPad mini, this week's AAPL instability isn't anything to be alarmed about, said Susanto.
"I don't have any major concerns about the company, and the stock price changing isn't anything out of the ordinary" he said.
In addition to its share dip over the past week, Apple found itself facing trouble on the legal front as well, although it didn't pertain to the typical patent suits in which the company is embroiled.
The Department of Justice announced last week it is suing Apple and five publishers over an alleged price-fixing scheme for electronic books. The suit alleges that when Apple began offering e-books on the iPad, it conspired with major publishers to raise retail prices and then give Apple a 30 percent cut of the sales. Even though Amazon, as an already established online retailer, could afford to sell the books at more discounted prices, it was allegedly forced to follow suit and start raising retail prices.
Three of the publishers, Hachette Book Group, Simon & Schuster and HarperCollins, have already settled. Apple has denied collusion, but it hasn't offered further details about how it plans to deal with the suit.
"Theoretically, it should be a win for consumers, at least in the near-term," Pete Wahlstrom, analyst at Morningstar, told MacNewsWorld. "The e-book market is still relatively new and is expanding quickly. Amazon has already praised the DoJ's action and is looking forward to lowering prices on its Kindle content."
But that doesn't necessarily mean Apple is in a position to lose much, said Wahlstrom.
"The outright worst-case scenario would probably be one in which Apple is barred entirely from selling the digital/e-book content, but that's extremely unlikely," he said.
If content providers such as Barnes & Noble and Apple are forced to lower prices, the e-book economic landscape would change, although not necessarily at a great loss to Apple.
"Barnes & Noble and Apple may need to follow suit in order to maintain, or potentially gain, share," said Wahlstrom. "Meanwhile, if the content owners need to offset higher costs, they may choose to push through higher prices onto the content deliverers. Longer-term, if one or more content deliverers exits the business, prices could come back up as the remaining participants seek an adequate return for the business."
Apple didn't respond to our requests for comment on the story.