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Various Analyses Coming Out on Sudden Sharp Decrease in Apple's Stock Price
Ulterior Motives
Various Analyses Coming Out on Sudden Sharp Decrease in Apple's Stock Price
  • By matthew
  • September 5, 2014, 09:00
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The stock price of Apple, the top-ranked company in market cap, plunged by more than 4 percent to US$98.94 on Sept. 3 (local time), the largest drop since late Jan. Although 28 trillion won (US$27.3 billion) evaporated, it is not easy to pinpoint the exact reason for the phenomenon.

Observers say that the price drop is attributable to the recent hacking incident of Apple's iCloud, which resulted in a leak of nude photos of celebrities. They believe that the incident caused investors to worry about potential problems related to the company's ability to protect private information, which led to a sudden sharp decrease in Apple's stock price.

In particular, experts point out that if the issue of protecting private information also has an adverse effect on Apple's healthcare or mobile payment services, which are expected to be launched with its new product on Sept. 9, the company may suffer a major setback.

The hacking incident, however, occurred on Aug. 31, and Apple's stock price hit an all-time high on Sep. 2. Therefore, some in the industry think that it is difficult to say that this incident directly affected the sudden fall in Apple's stock price.

Another possible factor is that Pacific Crest's Apple analyst, Andy Hargreaves, recommended selling Apple shares on Sept. 3, because the stock price had already rose significantly.

Hargreaves set his price target at US$100, assessing that Apple's current price is “outperforming.” He also said that if there aren’t any massive incremental profit opportunities announced the week of Sept. 9, that he is likely to downgrade Apple from Outperforming to Sector Performing.

According to some overseas media outlets, the better-than-expected responses to Samsung's new products showcased at this year's IFA such as the Galaxy Note 4, the Galaxy Note Edge, the Gear S, the Gear Circle, and the Gear VR may have had an influence on the drop.

The new iPhones will come with a much larger (4.7 inch or 5.5 inch) screen compared to old models, similar to Samsung phones. Hence, the new iPhones are expected to encounter direct competition with Samsung smartphones. However, this is limited only to the reflection effect, and it does not appear to have had any huge impact.

When it comes to issues associated with products, Commercial Times' prediction that the initial supplies of Apple's new iPhone are likely to be smaller than expected may have exerted a stronger influence. The Chinese language financial newspaper quoted market analysts, saying that 13.5 million units of the iPhone 6 are expected to be supplied by the end of this month, 2.5 million units fewer than initially thought, since the assembly process is more complicated than expected.

Nevertheless, there is a simpler and more persuasive explanation for the drop in Apple’s stock price.

The most fundamental reason is that the company's stock price rose significantly over a short period of time in reflection of the anticipation for the iPhone 6. As a result, it slipped back. 

Previously, Apple’s stock price rose ahead of the announcement of its new products, owing to growing expectations. But the stock price went through an adjustment process for a while, caused by disappointments with a lack of innovation. After that, the sale of the new product went beyond market expectations, leading to a rally in its shares on the stock market. This pattern has often repeated in the past.