When the world’s hottest stock suddenly cools, investors start to worry.
Apple Inc. not only fell 4.2 per cent on Monday, marking its biggest one-day dip since October, it fell when much of the rest of the market rose. And in doing so extended its losing streak to five straight days, which is its worst slump since September.
For sure, fans and foes alike could sense that something like this was coming.
You don’t have to be a chart wizard to see that the share price had been moving too high, too fast – blasting nearly 50 per cent above its 200-day moving average as it rose more than 10 per cent a month in 2012.
Put another way, the stock market’s value of this company had been rising by an average of more than $3-billion (U.S.) per trading day since the start of the year, a pace that cries out for a pause.
And you don’t have to be a market psychologist to see that these gains coincided with some awfully frothy-looking commentary.
At least two analysts tripped over themselves recently with the highest target prices on Wall Street. While others fiddled with earnest-looking predictions of $700 and $750 a share, they cut through the chatter with $1,000 targets, drawing comparisons to the kind of head-scratching analysis we saw in the late-1990s tech bubble.
As for more concrete reasons why Apple shares might be slumping, you can take your pick.
One analyst pointed out that there is speculation that Apple could introduce a smaller, cheaper version of its iPad tablet, raising concerns that the company will cannibalize its own iPad sales.
Another warned that U.S. mobile-phone carriers could cut the generous subsidies they provide to consumers who buy iPhones with long-term contracts.
Yet another believes that Apple is going to miss iPad sales forecasts when it reports its quarterly results on April 24.
Meanwhile, the U.S. Justice Department last week sued Apple over allegations that the company had conspired with publishers to fix the prices on electronic books.
And don’t forget about the economic headwinds: U.S. employment news has disappointed recently, and people without jobs are people without iPads.
Whatever the explanation, Apple’s slump boils down to this: As the world’s largest, richest, best-known company, Apple might have more to lose than gain at this point, as expectations become nearly impossible to fulfill.