Apple shares fell $23.44, or 5.50%, to $402.80 in regular trading on NASDAQ. In the past 52 weeks, Apple's highest price was $705.07, and its lowest price was $398.11, which was touched in early trading on Wednesday. Apple's share price is down 42.9% from its all-time high of $705.07 in September.
Lower expectations
Tony sacconaghi, an analyst at Bernstein research, a market research firm, on Wednesday reiterated Apple's' outperform 'rating and $725 target price, but also cut its performance forecast. Sakonaji predicted that Apple's revenue in the second quarter was $41.1 billion, lower than the previous forecast of $42.4 billion; earnings per share was $10.02, lower than the previous forecast of $10.52. He also expects Apple's revenue to be $33.9 billion in the third quarter, lower than the previous forecast of $35.7 billion, and earnings per share to be $7.81, lower than the previous forecast of $8.51.
At the same time, sarknaghi also lowered his iPhone sales forecast to 34.2 million units from 35.2 million units, and iPad sales forecast to 18.5 million units from 19.5 million units. Apple is scheduled to release its second quarter results after the close of the US stock market on April 23 EST (early morning of April 24, Beijing time).
Mr. sarknaghi argues that profit margins are Apple's main problem; but he expects Apple's profit margins better than most Wall Street analysts. "We expect Apple's gross profit margin of 37.5% to 38% in the second quarter to be a negative factor for its share price, while a gross profit margin higher than 38.5% will be seen as a positive factor," Mr. sakonagi said. Although we slightly lowered our forecast for Apple's performance in this financial quarter, we still expect its gross profit margin to be 39.3%, which is higher than the upper limit of Apple's previous expectation range and the average expectation of analysts (both 38.5%). We also expect Apple's gross margin to be 39.6% in the third quarter, higher than analysts' average forecast of 38.8%. '
Supplier warning
Another factor weighing on Apple's share price came from an early warning from cirrus logic (crus), an iPhone audio chip supplier that included a significant inventory related reserve in its fourth quarter results. The company said: 'expectations for a high volume product (shipment) fell as customers switched to a new component from cirrus logic. '
Apple is cirrus logic's largest customer, and both iPad and iPhone use cirrus logic's audio chips. As a result, cirrus logic's share price is largely affected by apple. In recent quarters, the iPad and iPhone have boosted cirrus logic's revenue growth. Cirrus logic expects revenue to reach $206.9 million in the fourth quarter of the fiscal year ending March 30, 2012. In January this year, cirrus logic had expected revenue of $200 million to $220 million in the fourth quarter, which was also lower than Wall Street's expectation.
Cirrus logic shares fell more than 13% on Wednesday. Vernon essi, an analyst at Needham Co, a U.S. investment firm, downgraded cirrus logic's stock rating, saying: 'we believe apple is the reason for the company's loss of its mobile business. '
Dividend plan
Analysts said Apple may not announce a higher dividend or a change in its' capital allocation strategy 'when it releases its results next week, but it is expected to do so in the near future.
Apple announced its first dividend in March last year, and many investors have been hoping for more cash back to shareholders since then. Sakonaji pointed out that the dividend plan announced by Apple last year has covered most of the cash generated by the company in the U.S. market, so if Apple plans to 'significantly' increase the scale of cash return this year, it will face more complex problems.
In February this year, there were market rumors that Apple might announce a split and special dividend at the annual general meeting, which once pushed the company's share price up. At that time, Apple's share price had fallen by more than 36% compared with the historical high, and the stock split plan (especially for the stock with higher price) could improve the attractiveness of the stock to investors. Rumor also said that Apple may also adopt a reverse stock split plan to merge multiple shares into one. But Apple didn't announce such a move at the general meeting, and its share price continued to fall.
new product
Goldman Sachs analyst bill Shope pointed out that Apple's upcoming new products are likely to help reverse investors' negative sentiment towards the stock. He said: 'we believe that the company's growth momentum in the near future is likely to weaken further until the launch of new products. '
Last month, it was reported that Apple planned to release the iPhone 5S in August this year, while the next generation iPad (possibly named iPad 5) and ipad Mini 2 may be released as early as April. According to the report, the basic design of the iPhone 5S is the same as that of the iPhone 5, but it has a more advanced processor and an improved camera. In the case of the iPhone 5, Apple has reduced the thickness of the shell without sacrificing the overall quality; and with the iPhone 5S, Apple's goal is to go up the optical ladder again, providing a much better camera in the basically same shell. In addition, the only major design change of the iPad 5 may be its shell; for the ipad Mini, it seems that this product will not use the retina display in the near future.
But analysts also pointed out that Apple users may be moving from the 9.7-inch iPad to the ipad Mini, which will damage the company's profit margin.