Ryan Stern, Junior Technology Analyst:
Today Apple shares declined 6.43% to $538.79 representing a $37.05 loss off a slew of negative company news. Media companies including CNBC cited reports that Apple’s margin requirements have been raised by at least one clearinghouse. Apple is still up 33% this year, but is down nearly 24% from its record high in September of $705.07. While the raised margin requirements have not yet been confirmed by Reuters, the sell-off was mainly fueled by an influential research firm who projected Apple is losing market share in the table space. International Data Corp said Apple has likely shed market share in 2012 to competitors such as Google and Microsoft. IDC projected Apple’s worldwide tablet market share will slip to 53.8 percent in 2012 from 56.3 percent in 2011, while Android products will increase their share to 42.7 percent from 39.8 percent. IDC also projected Windows tablets to rise from 2.9% in 2012 to 10.2% of the market in the year 2016 due to the recent launch of Windows 8 and Microsoft’s Surface tablet. The decline has also been attributable to Investors taking profits concerned about increasing tax rates on dividends and capital gains. Despite Apple’s worst decline in 4 years, it is now gearing up for the introduction of its latest iPhone 5 and iPad mini in international markets. It will begin selling the iPhone 5 in 50 countries in December, including China and South Korea. Apple still remains a leader in the computer hardware industry and we believe Apple’s quarter 4 will benefit from the release of the iPad mini and revenue growth from iPhone 5 sales.
We reiterate Apple as a buy and believe uncertainty has unjustifiably caused this sell off despite leading industry margins, substantial earnings growth and continued innovation. In addition, we will reevaluate the portfolio’s exposure to the tablet market within Apple (and potentially, Microsoft) to determine if the portfolio would be overexposed.