Cramer and a downgrade push Apple below $500

Apple is off 31% since mid-September and the CNBC anchor thinks the company has lost its way. Nomura Securities cuts its price target to $530, but other analysts disagree.

By Charley Blaine Jan 15, 2013 8:36PM
© Aflo/Rex FeaturesApple (AAPL) shares closed below $500 on Tuesday for the first time in nearly a year. The shares are down more than 30% from their peak in September.

For that you can thank CNBC's Jim Cramer, who trashed the company on his Monday evening show, and Nomura Securities. On Tuesday, the investment house cut its price target on Apple to $530 from $660. The price target is the lowest among analysts who follow the stock.

Apple shares closed down $15.83 to $485.92 on Tuesday. The close was Apple's lowest since Feb. 8 as well as its first close under $500 since Feb. 15, 2012, when it finished at $497.67.

The stock hit a closing high of $702.10 on Sept. 19, 2012, and peaked at $705.07 on an intraday basis on Sept. 21. It's down more than 31% since.

Some analysts are cutting estimates on Apple's stock because of reports of softer-than-expected demand for the iPhone 5. The iPhone family is Apple's biggest profit generator. The Wall Street Journal reported Sunday that the company had cut orders for components for the phone.
Cramer's rant about the company came during his "Mad Money" show on Monday. He opened with "Is Apple backing away from being Apple?" Then, he listed his worries:
  • The company has missed Street estimates on earnings for two quarters in a row. Apple reports fiscal first-quarter earnings on Jan. 23. The first quarter is traditionally the company's biggest.
  • New products have been received with enthusiasm but not wild enthusiasm.
Plus, he had anecdotal evidence of issues. His daughter, for example, says she doesn't like Apple's latest release of its iTunes software. Neither do her friends.

He went to activate the 3G wireless feature on his new iPad mini, and the Verizon staffer who helped told him that "Apple's going down the wrong path -- that it is charging more for a product that isn't that superior to Samsung's phone with Google software and that, in many ways, it is inferior."

Cramer's reaction: "I was stunned."

And then he remembered a conversation with Walter Isaacson, author of a best-selling biography of Apple co-founder Steve Jobs. Cramer wanted to know if Jobs had said anything before his death of a breakthrough product, like the oft-talked-about Apple TV. Jobs apparently said the TV project was stumbling. The cable operators didn't need an Apple TV the way the music industry needed iTunes.

And with that, he sold shares he held in his charitable trust.
Nomura's downgrade was not based on Cramer. Instead, analysts Stuart Jeffrey and Woo Jin Ho said the move was made "to reflect weaker-than-expected sales of the iPhone 5 as indicated by our checks."

Nomura cut its iPhone unit sales estimates by 2 million to 48 million for the December quarter (the first of its 2012-2013 fiscal year), by 4 million to 39 million for the March quarter and by 9 million to 157 million for the full year.

Nomura raised its unit forecasts for iPad sales by 1.8 million to 21 million for first fiscal quarter, by 2.4 million to 20.6 million for the second quarter and by 9.7 million to 89.6 million for the full year. noted that Sterne Agee analyst Shaw Wu believes Nomura is all wet.

"There is great confusion with press reports of order cuts and weak demand," he wrote clients. "From our understanding, the reason is two-fold: (1) much improved yields meaning lower component builds and (2) supplier shifts."

Meanwhile, fund manager Gabelli & Co. called the stock "an attractive investment opportunity."

Apple was the biggest loser among stocks in the Nasdaq-100 Index ($NDX) and in the Standard & Poor's 500 Index ($INX). Apple has fallen 6.6% in just two days and is off 8.7% for January.

Apple was a big reason for the stock market's strong performance in 2012. Shares were up 31% despite falling 24% between mid-September and Dec. 31.

When Apple sported a market capitalization of more than $660 million in September, making it far and away the most valuable company in the world, it was the favorite of hedge funds.

With Tuesday's close, the market cap has been cut to $457.10 billion, and reports say hedge funds have been among the biggest sellers.

The market cap is now down some $240 billion and goes a long way to explaining why the Nasdaq-100 fell nearly 5% in the fourth quarter of 2012. Apple has represented some 17% of the market cap of the entire index.

If there's any solace for Apple, its market cap is still the largest in the world. Exxon Mobil (XOM) had a market cap of $408.2 billion with Tuesday's close. Exxon shares were down 5 cents to $89.53.

More on Money Now

Jan 16, 2013 12:08PM

I know lots of people who would love to buy apple if they split the stock.People arn`t

going to buy 5 shares.Companies used to split their stock when it hit $100.It`s time

they split it to $50.

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