Apple’s stock is continuing on its steady decline, falling by 2.5% and hitting an all new low of $430 on Friday. Apple’s stock is down by nearly 40% since it began its downward slide from its $700 peak last September. It might probably be the first time that people have lost money holding on to Apple’s stock. One can’t help but wonder where this trend is going and what the reasons are for it.
One of the main reasons attributed to the decline in the stock value is that many investors theorize that the days of Apple’s growth are nearing its end and are trying to get rid of it. This is probably a reaction to the subpar fourth quarter sales report. There has been slight decline in the sales numbers of the iPhone 5, owing to the increased competition from Android and Windows Phone powered high-end devices.
There have been reports that Apple had cut its orders for iPhone units by almost 10 million. The iPhone 5 was not a smashing success as Apple hoped it would be and this might reflect in a lower than expected Q1 sales report. Moreover, Apple is right in the middle of a ‘new-product blackout period’, with the next version of the iPhone not expected to arrive till June or July. Market speculation suggests that the upgrade may not be as major as expected. With Samsung expected to launch its new flagship – the Galaxy S4 – in a couple of weeks, the situation can get only worse for Apple.
The smartphone and tablet market has become more sensitive to price, and low-cost and mid-range devices are capturing a far larger market share. This will only cause Apple’s profit margin to decline as they try to competitively price their iPhone and iPad, something which the company has resisted so far. Apple may release a cheaper version of their iPhone, but this will not give them room for a significant profit margin. Apple is speculated to be working on a couple of ‘revolutionary’ product. One of them is a smart television, which has been speculated for nearly two years now and still seems to be years away.
It is not certain if this device would sell well as many attempts to reinvent television over the last decade have all gone in vain. Another speculated product, a smart watch dubbed as iWatch, may arrive this year but how consumers would react to such a device is still uncertain. Either way, it would have to be competitively priced, which would not result in much profitability.
