epa04856578 Customers are silhouetted inside of an Apple store in Sydney, Australia, 22 July 2015. Apple reported a 33 per cent increase in earnings for the recent fiscal quarter, but investors were still worried when iPhone sales missed analyst estimates. Quarterly net income of 10.7 billion dollars (9.8 billion euro) topped the 7.7 billion dollars netted in the same quarter last year by a third, driven by 'record sales' of iPhones and Mac computers, the company said in an earnings release. EPA/PAUL MILLER AUSTRALIA AND NEW ZEALAND OUT
Customers browse in an Apple store in Sydney © EPA

Apple, the world’s most valuable company with a $658bn market capitalisation, is losing its lustre with the stock price having fallen nearly 13 per cent since mid-July, write Michael Mackenzie and Eric Platt.

The maker of iPhones, iPads and Mac computers has been a stock market darling during the current bull run and dominates investment portfolios.

A seven for one stock split in June 2014, resulting in a much lower price, only bolstered the appeal of owning Apple among retail investors and helped pave the way for the company being invited into the Dow Jones Industrial Average in March this year.

Why is Apple’s stock under pressure?

Signs of slower growth in China have rattled investor sentiment and this comes in spite of chief executive Tim Cook’s bullish outlook for sales in the country in a recent earnings call.

Although Apple more than doubled China sales to nudge third-quarter revenues and earnings just ahead of market forecasts, investors were rattled as iPhone sales fell short of expectations.

This week Canalys, the research firm, said Apple had lost its position atop the Chinese smartphone market to upstart Xiaomi during the second quarter.

What has happened to the stock price?

Apple climbed to a closing peak of $133 in February, only to consolidate in a range until mid-July.

Selling pressure pulled the stock below important measures of momentum, known as the 50- and 100-day moving averages.

That was apparently enough to accelerate selling, particularly in a market dominated by algorithms that quickly react to such signals and can exacerbate trends.

The stock has since dropped through the important 200-day moving average, a measure not breached since September 2013, reinforcing just how bearish the price action has become. After opening nearly 1 per cent higher on Thursday, sellers emerged and the stock closed 0.2 per cent lower in New York.

That leaves Apple’s stock 4.3 per cent higher this year, handily beating both the DJIA and S&P 500, but trailing the Nasdaq Composite.

But the big question now is whether Apple is set to repeat its late 2012 decline, which resulted in the stock retreating from $100 to $55 (after adjusting for last year’s stock split) over seven months.

How does a lower Apple price influence the broader market?

Apple’s share price slide has weighed heavily on broader indices with every $1 change in Apple’s share price resulting in a 0.65 point shift in the S&P 500, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

In the price-weighted DJIA, Apple only ranks as the fifth-worst performing stock over the past month.

In terms of importance, Apple’s current stock price of $115.13 means it trails many other companies that have higher prices, led by Goldman Sachs at $205, followed by IBM, 3M, Boeing, United Health and Home Depot.

Why should the slide in Apple worry investors?

Apple has dominated the bull market that began in March 2009. Indeed, it has risen 870 per cent, outstripping the S&P 500’s rise of 210 per cent and a gain of 341 per cent for the Nasdaq 100.

It has also become a huge payer of dividends and buyer of its own stock, bowing to pressure from activist shareholders to do more with its pile of cash.

This year Apple said it would expand its dividend and buyback schemes to return $200bn to shareholders by the end of March 2017, up from the $130bn programme of a year ago.

That includes a further $50bn in share repurchases and an 11 per cent dividend increase.

But this ageing bull market looks vulnerable and many highlight how this year alone leadership has resided in a handful of stocks.

Just seven account on their own for all of the sub 2 per cent rise in the S&P this year — Amazon, Walt Disney, Google, Gilead Sciences, Facebook, Netflix and, yes, also Apple.

So we may well be seeing one of the cornerstones of the bull market sending investors a very important message.

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