Apple Suffers Biggest Drop in Four Years: A Buying Opportunity for Investors?
Shares of Apple (AAPL) dropped more than 6.4% on Wednesday and the company lost $35 billion in market value. Apple opened down 3.2% on Thursday and had fallen below $530 in earlier trading.
For technical traders, this news indicates that Apple has traversed the death cross meaning Apple's long-term moving average has broken above its short-term support level. The death cross typically indicates that a bear market is approaching.
Explanations for the abrupt loss are plentiful and varied.
One explanation is that Google's Android gadgets are continuing to gain ground, especially in China where the iPhone is struggling. International Data Corp estimated that Apple's tablet market share will decrease from 56.3% to 53.8% in 2012 while market share for Android products will increase to 42.7% from 39.8%
Another reason for the selloff: Apple is not paying a special dividend before capital gains taxes are raised in 2013.
"There are some people saying 'hey because they haven't done that they are being punished,'" says Aaron Task. "Investors are waiting and Apple is sitting on this tremendous amount of cash so why not."
On top of a diminishing market share and weak economy, there are unconfirmed rumors that some clearing firms were raising the margin trading requirements for Apple stock.
Any number of these things may have contributed to the stock's plunge on Wednesday.
Technical analysts might be bearish on Apple but there is certainly room for a steep recovery. Apple CEO Tim Cook is currently on a crisis management tour and will be featured in an exclusive interview on NBC's Rock Center tonight with Brian Williams. Apple has also announced that it will resume some production of its Mac computers in the United States and will spend $100 million in domestic manufacturing in 2013.
Whether or not you're convinced the era of Apple is officially over, the tech giant is still up 33% this year. Maybe the recent weakness signals a temporary sale for investors.
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Apple Could Fall Below $500 a Share: Barry Ritholtz
