Since last February, for the first time ever, Apple Inc. shares have dropped below $500, after the Citigroup Inc.’s decision of reducing its rating for the stock. The decision was taken as the demand for its product iPhone 5 has slowed down. Currently, each share of Apple is priced at $499 and has declined by 3.8% from its 14th December value of $509.79. On 19th September, stocks of the company were at its peak that of $702.10 and since then, have experienced a total decline of 27%.
The note released from Citigroup stated that many of the Asian suppliers of Apple iPhone 5 have reported that the orders have seen a decrease and that definitely has raised questions on the strength of iPhone 5. Therefore, the bank has decided to reduce Apple’s rating from neutral to buy and the price estimates of $675 were also chopped down to $575. Apple also faced troubles to meet the initial demand of iPhone 5 and is currently facing a stiff competition from Nokia and Samsung. The shares are actually heading for a drop for 3 months consecutively.
Incidentally, Citigroup is not the only bank that has reduced the price estimates of Apple for December. Earlier, on 14th December, UBS AG cut the price estimates to $700 from $780. It stated that the growth for the iPad and iPhone franchise is constantly slowing down. Peter Misek who works as an analyst for Jefferies & Co. also cut the estimates for Apple shares by $100 to $800 as he received reports of different Apple component suppliers, who saw lesser number of orders.
The Chief Executive Officer of World’s largest mobile phone company China Mobile, Li Yue stated that they have decided not to add iPhone 5 to its network until a better deal is offered to them. On the other hand, the Lumia 920T smartphone from Nokia has already been declared as an official part of China Mobile’s network, giving further blow to Apple. Nokia is currently looking to expand the market of its latest smartphone to Asia and Europe.
It is feared that the supply chain of Apple is going to face an earnings risk and hence share prices of those companies may also go down. The Asian suppliers of Apple have already seen a decline and the MSCI Asia Pacific Index have also plummeted by 0.09%.