Apple Inc’s Shares Swallow Biggest Loss in Four Years

NEW YORK | Wednesday, December 5th, 2012 9:15pm EDT

Apple shares suffered their worst decline in years as selling momentum gained steam for the longtime tech star and world’s largest company by value.

Apple Inc Shares Swallow Biggest Loss in Four Years 01

There are a variety of explanations for the tumble offered by talking heads, ranging from a research report to a technical death cross. The real reason was forced selling based on margin calls. Photo: Jorge Quinteros/Flickr

Apple’s stock just had its worst day of the year.

Apple Inc shares dropped by more than 6 per cent on Wednesday, chalking up their biggest single-day loss in four years as fears grow about intensifying competition in the mobile device market.

It declined a share by $37 and closed below $540 for the first time in more than two weeks. All in all, Apple’s market cap declined by just under $35 billion today — or nearly twice the market cap of Dell.

There are a variety of explanations for the tumble offered by talking heads, ranging from a research report to a technical death cross.

Stifel Nicolaus analyst Aaron Rakerswith and UBS analyst Steve Milunovitch both suggested that the stock’s decline may have something to do with AT&T’s CEO suggesting that iPhone sales in the fourth quarter might have grown by less than expected.

Other analysts pointed to more general concerns, like Apple’s product lineup for the coming year and ongoing debate in Washington over how to avoid the fiscal cliff. Even so, some analysts seemed exasperated by the seeming randomness of the stock’s fall, as it is written on Mashable.

According to the Forbes, the real reason was forced selling based on margin calls. There is strong anecdotal evidence that a large number of buyers near the recent swing high in the zone of $570 to $590 were short-term speculators buying on margin. So the fall was the forced selling by the speculators who bought on margin near the recent swing top.

A small firm, COR Clearing, raised margin requirements on Apple from 30% to 60%. There were rumors all day long about other firms also potentially raising margin requirements on Apple.

Apple’s shares, once among the most desirable of portfolio holdings, have headed steadily lower since September on growing uncertainty about the company’s ability to fend off unprecedented competition. This year saw a surge in sales of Amazon.com Inc’s cheaper Kindle Fire and Microsoft Corp’s first foray into the tablet market with its Surface.

Reuters says that the assault on Apple’s consumer-electronics home turf presents a stiff challenge for CEO Tim Cook, who was elevated shortly before the death of Silicon Valley legend Steve Jobs and is now charged with keeping the world’s largest technology company humming.

“This is not going to be a short-term trend. This is a management test, of how well they can perform without Steve Jobs,” said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago. Referring to Apple’s new iPad mini, which is only a smaller version of the existing iPad, Battle said the company needs “another home run” for shares to return to levels around $700.

“They need another new product that hits it out of the park. Without that, they could get a gradual grind-down in confidence,” he said.

Research firm International Data (IDC) said the company is expected to deliver reliably high revenue and earnings expansion for years to come, and one in two tablets sold globally remains an iPad.

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