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Posted on 27 October 2012 | 6,808 views

Apple Shares Crash Further After Holiday Warning

Apple’s stock (Stock Symbol: AAPL) fell below $600 per share on Friday October 26, 2012 for the first time in three months, after the consumer electronics behemoth warned that costs of making new products will cut into profits in the holiday quarter.

Apple said profits for the rest of the year would fall from last year because it’s launching so many new products. It’s expecting mammoth sales, but new products are more expensive to make than older ones.

Wall Street analysts took the adjustment in stride, knowing that Apple nearly always lowballs its estimates, but several cut their earnings estimates for the fiscal year that started this month. Stuart Jeffrey noted that Apple’s profit margins should be back to normal in the quarter that starts in April, but that will be too late to fully make up for the earnings hit in the holiday quarter. He cut his earnings estimate for the year by 10 percent and his price target on the shares from $710 to $660 per share.

Apple’s stock last fell below $600 following an earnings report as well. It missed expectations in the previous quarter, too, something rare for Apple.

Apple started taking orders for the iPad Mini on Friday. The new, smaller version of the iPad tablet starts at $329. Initial shipments of the white model quickly sold out on Apple’s site; buyers now will now have to wait two weeks for delivery. The black model was still available midday Friday for a one-week delivery.

Apple shares have now entered Bear Market territory and is now down 15% from its 52-week high — a 15% drop in Apple’s stock from its all-time highs sounds like a lot — until you actually use a little historical perspective to keep everything in context.

August 2004: Apple’s stock trades at $14 per share. It shoots up to $45 by February 2005 and then declines 23% to $34 by May. Later, it goes to $80 by January 2006.

January 2006: Apple’s stock is at $85 per share. Seven months later, it drops 42% to $50. And then by January 2007, It gets back to $92.

December 2007: Apple shares are at $200 per share. In February 2008, it drops 41% to $119. But by May, it is back to $188.

August 2008: Just before Lehman fails, Apple’s stock trades to $176 per share. Three months later, it drops 53% to $82. And yet 10 months later, it gets back to its August 2008 highs.

December 2009: Apple shares are trading at $211 per share. One month later, it drops 9% to $192. And 10 months after that it reaches $317.

November 2011: Apple stock trades at $366 per share. By April of this year, it gets up to $636. Then, it drops 17% to $530 by May.

September 2012: Apple shares reach an all-time high of $705 per share before a 15% pull back — still playing out.

In the grand scheme of things, a 15% decline from the highs means nothing. If you’re a short-term trader, meaning less than 3 months typical hold time, you could have traded in and out of Apple over the past 8 years and done terribly, or really well. Price fluctuations and pull backs are perfectly normal — even 42% pull backs for Apple shares.

Apple remains the most valuable public company in the world, by a wide margin, with a total market capitalization of $556 billion.

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