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What's happening to Apple's share price?

Karen Haslam | April 22, 2013
Last night Apple's share price declined to $392.05, wiping 44.16% or $310.05 of the value of each AAPL share since September 2012 (the stock closed at $702.10 on 19 September), and dropping to its lowest level since December 2011. In the first quarter of the year Apple was one of the worst performers of the S&P 500 in what is being described as a crisis among investors.

Last night Apple's share price declined to $392.05, wiping 44.16% or $310.05 of the value of each AAPL share since September 2012 (the stock closed at $702.10 on 19 September), and dropping to its lowest level since December 2011. In the first quarter of the year Apple was one of the worst performers of the S&P 500 in what is being described as a crisis among investors.

This is the first time the stock has fallen below $400 since December 2011, and it has wiped more than $20 billion in shareholder value, according to reports. What happened?

Why is AAPL in decline?

There are a number of potential causes of the decline. A recent report from a chip supplier hinted that Apple may have reduced orders for the iPhone and that confirmed some fears that the market for the device is in. Another potential cause: psychology. A number of shares may have been sold simply because $400 was a trigger than investors were anchored to. Anchoring is a common practice, explains Motley Fool. A lot of people may have anchored to $400 because it made sense to them psychologically.

1) Cirrus Logic preliminarily reported lower-than-expected revenues

Some analysts have speculated that 90% of audio chips from Cirrus Logic were bought by Apple so when the company published terrible projections features of weakened demand for iPhones and iPads were exacerbated.

Of course, it's feasible that Apple has in fact found a new supplier for the chips.

2) Lowered iPhone sales expectations

Fears that Apple will see fewer iPhone sales are nothing new amid concerns that the iPhone market has reached its peak in the Western world.

A number of analysts have cut their targets for iPhone sales. For example, Last week Morgan Stanley cut its iPhone sales forecasts for the quarter from 37 million units to 33 million.

Analysts estimates for how many iPhones Apple sold in the quarter ending in March range from 32.50 million (Shaw Wu, Sterne Agee) to 42.50 million (Michel Contant, The Braeburn Group). In the previous quarter (Sept-Dec) Apple sold 47.8 million iPhones. Read Fortune's complete list of analyst forecasts here.

There are also concerned that PC sales are in rapid decline, following estimates from IDC and Gartner

However, the good news is that Apple may only sell 5% of PCs worldwide, but the company makes 45% of the profits, according to Horace Dediu at Asymco.

He explains: "The real problem for the PC vendors is not that they have such low margins - they've had low margins for decades. It's that the volumes which 'made up for' low margins are disappearing."

3) Falling profit margins

 

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