Demand fears bruise Apple’s share price

Apple shares hit their lowest point in almost a year on Monday after investors, already jittery about the iPhone maker's results next week, were spooked by reports of supply-chain cutbacks.

Shares in Apple shaved the $500 mark in pre-market trading and closed down almost 3.6 per cent at $501.75 in New York. Investors in the world's most valuable company watched its share price rise from below $500 in early February last year to top $700 in September, from which point it has steadily declined.

Analysts' consensus forecast is that Apple will post a year-over-year decline in earnings for the first time in a decade. The company warned in October that margins would be put under pressure by the simultaneous launch of many products, including the iPhone 5, iPad mini and iMac.

The trigger for the latest sell-off came with reports from Japan's Nikkei newspaper and the Wall Street Journal that Apple had halved orders for iPhone 5 screens from suppliers for the period between January and March, to about 33m displays.

Apple declined to comment on the reports.

Wall Street analysts including UBS, Jefferies and Citigroup had already reduced their estimates a month ago, citing lower component orders from Apple. The WSJ said that Apple had notified suppliers of the cuts in December.

Nonetheless, the sharp reaction from investors to the latest highlights nervousness ahead of Apple's results next week for the three months to December.

“Many investors now feel the bloom is off the rose and that they have to trade Apple as if it’s a normal company now,” said JJ Kinahan, chief derivatives strategist at TD Ameritrade.

Results from US mobile carriers, including AT&T and Verizon, have suggested strong sales of the iPhone 5 before Christmas. But Apple is facing tougher competition from South Korea’s Samsung, which said on Monday that it had sold 40m Galaxy SIII smartphones since its launch in May, an average of 190,000 units a day.

Apple's supplier cuts may point to an upcoming launch of a new iPhone, which could come sooner than last year's update, to better compete with Samsung's frequent release of new devices.

Last year, Apple achieved record growth in the first quarter of its iPhone launch but suffered a more rapid fall-off in demand than investors had expected, as consumers waited for the next generation.

Some investors took advantage of Apple's weak share price to top up longer-term positions. Oliver Pursche, portfolio manager at Gary Goldberg Financial Services, said: "There is credence to the statement that Apple has lost some of its shine and fallen out of favour with some investors."

But noting its large cash pile and potential for higher dividend payments, he said Monday's sell off was "an overreaction to the downside and in separate accounts we are adding to the position".

Apple remains the largest and most influential stock on the S&P 500, with a market value of $475bn. But as of midday on Monday its shares made up 3.6 per cent of the benchmark, far from its peak of close to 5 per cent of the index last year, highlighting its waning influence on the stock market.