Apple Inc. shares dropped close to bear market territory Monday on concerns that consumers are no longer clamoring for its cornerstone product, the iPhone.
The stock closed at a record high of $232.07 on Oct. 3. Since then it's plunged almost 20 percent -- the official bear market threshold -- as multiple suppliers indicated the company is cutting parts orders for the latest iPhones. Apple's earnings on Nov. 1 raised more concerns when the company reported flat unit growth and said it will stop disclosing how many smartphones it sells each quarter.
Apple and its supporters say the company can still generate revenue growth in a stalled smartphone market by charging more per device and selling customers an increasing amount of digital music, movies and other services. However, those strategies are relatively untested, especially compared to the past decade of iPhone ascendance.
"When we get into these situations where the current product may not be moving as well as investors expected, some get scared and then the fear compounds itself," said Jason Benowitz, senior portfolio manager at Roosevelt Investment Group, which owns Apple stock. 'We're not really too concerned. Some of this is probably just noise like it always is."
Apple shares fell 4 percent to $185.86 on Monday.
The company's shares are often buffeted by signals from its global supply chain. Last year, warnings from some manufacturing partners sparked worries that Apple's new iPhone X might be a dud. But when the company reported holiday results, sales numbers for the device were solid, sparking a recovery in the stock.
This time around, more iPhone suppliers and assemblers have warned of weaker orders. Underwhelming earnings by Hon Hai Precision Industry Co. and a quartet of smaller companies, including Japan Display Inc., reducing revenue estimates led investors to conclude that Apple isn't getting the initial rush of sales for new iPhone models that it usually does.
"More growth-oriented holders are figuring out that growth isn't occurring like they thought it would, especially with the new fancy phones," said Kim Forrest, a senior portfolio manager at Fort Pitt Capital Group.
Apple exacerbated this by changing the way it reports unit sales, she added. "That was a huge red flag. It seems like they just didn't want to have to deal with those questions."
Business on 11/20/2018