CUPERTINO -- Apple's (AAPL) epic four-month stock slide reached a new low Tuesday, as the tech giant's shares closed lower than $500 for the first time in eleven months after reports of weaker-than-expected iPhone demand helped produce a second consecutive day of heavy losses.
Apple shares closed at $485.92 Tuesday after a 3.2 percent plunge, the first time Apple shares have closed lower than $500 since Feb. 15 and the lowest closing price since Feb. 8. Apple has been in a freefall since the company introduced the latest iteration of its popular smartphone, the iPhone 5. On the day the device launched in the United States, Sept. 21, Apple hit an all-time high of $705.07; in the long slide from that mark, Apple declined 31.1 percent through Tuesday's session.
The latest bout of weakness seems to be a reaction to reports that the Cupertino company has cut back on components for the iPhone 5 because demand for the device from consumers has not lived up to expectations. The Wall Street Journal and Japanese news source Nikkei reported Monday morning that Apple had slashed its component orders in half because of weak demand, and shares dove 3.6 percent into the red in Monday's session.
Some financial analysts doubt the report, however: Sterne Agee analyst Shaw Wu wrote in a note that "As far as we can tell, iPhone 5 demand remains robust," while Baird analyst William Power said "most demand indicators remain favorable."
Wu suggested that the cut in component orders could be attributed to improvements in Apple's production, as fewer components yield a greater number of iPhones. JPMorgan analyst Mark Moskowitz agrees, telling AppleInsider that "order cuts are a direct result of manufacturing yields improving following the fast-and-furious product rollouts of the iPhone 5 as well as new iPads and Macs."
Global Equities analyst Trip Chowdhry offered a different explanation, writing that Apple is likely switching screen technology in future iPhones, and therefore needs less of their current supply.
Some analysts agree that demand for Apple's signature smartphone -- its biggest profit provider -- is weak. Nomura analysts slashed their price target on the stock from $660 to $530 Tuesday and reduced their estimates for iPhone sales in the holiday-shopping quarter, as well as the current quarter and full year. The analysts explained that their checks on Apple's business show "weaker-than-expected sales of the iPhone 5."
Apple will announce iPhone sales for the holiday quarter, as well as financial information for its fiscal first quarter, in an earnings report on Jan. 23.
Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.