By Rex Crum, MarketWatch
SAN FRANCISCO (MarketWatch) -- Apple Inc. on Tuesday suffered
its worst single-day market performance in a year, as the company's
share price fell 8% following a one-two punch combination of
disappointing iPhone sales and a weaker-than-expected revenue
forecast.
Apple (AAPL) ended the day down by $44 at $506.50 a share, and
finished at its lowest close since ending Oct. 17, 2013 at $504.50.
And nearly all fingers were pointing at the iPhone and concerns
about Apple's ability to grow revenue in emerging markets at a time
when the U.S. market for smartphones may be reaching a saturation
point.
Late Monday, Apple said it sold 51 million iPhones in the last
three months of 2013, or 7% more than it did in the same period a
year ago. But many industry analysts had forecast the company to
sell between 55 million and 56 million iPhones.
And the concerns about the iPhone were only heightened by a
forecast of fiscal second-quarter revenue between $42 billion and
$44 billion, which fell short of consensus estimates of $46.12
billion. That outlook was disconcerting as China Mobile (CHL), one
of the world's biggest mobile-phone network operators, just began
offering the iPhone in January.
"The company implies [sales of] iPhones may be close to flat
year-over-year in March despite the addition of China Mobile," said
Gene Munster, of Piper Jaffray. "We believe a number of factors
influenced iPhone [sales] in December and March including a
slowdown in US smartphone growth."
Munster noted there is evidence the smartphone market in the
U.S. "is largely saturated and is close to operating on upgrades as
the bulk of product sales," which could imply flat growth for the
iPhone and other smartphones going forward.
"There were a lot of reasons to believe iPhone sales would grow
[by] double-digits in units in 2014 even as the market matured,"
added Tavis McCourt, of Raymond James. "But first-quarter results
and the March [guidance] pretty much put that thesis to rest."
McCourt trimmed his rating on Apple's stock to outperform from
strong buy, and shaved his price target to $550 a share from $700,
saying "the clear maturation of the high-end smartphone market
limits Apple's growth potential in the near term, and its
valuation."
That valuation seemed enough to spur activist investor Carl
Icahn to open up his checkbook. Icahn tweeted that he "just bought
$500 mln" more shares of Apple stock less than a week after
revealing another $500 million purchase of Apple's stock. Icahn has
called upon Apple to return more cash to its shareholders either
through a larger dividend payment or stock buybacks.
Still, shares were on track for their biggest drop since Jan.
24, 2013, when shares skidded 12.4%, according to FactSet.
Also read: Stock could slide 40%, says Dohmen analyst
In addition to Apple, Seagate Technology (STX) was also a
notable decliner. The hard-disk drive maker's stock fell more than
11%, to $51.52 after it reported fiscal second-quarter results that
missed analysts' earnings and revenue forecasts.
Printing technology company Lexmark International (LXK) was a
notable gainer, rising more than 9% to $38.13. Before the market
opened, Lexmark reported fourth-quarter results that exceeded Wall
Street analysts' estimates, led by higher sales of its managed
print services and software.
Netflix Inc. (NFLX) also had a good day of it, rising 6.7% to an
all-time high close of $406.77. The Wall Street Journal reported
that Netflix is in talks about bringing its service to France,
Germany and other European countries this year.
The Nasdaq Composite Index (RIXF) rose 14 points to close at
4,097, while the Philadelphia Semiconductor Index (SOX) managed to
end the day with a small gain.
More tech news from MarketWatch:
Apple takes a hit as iPhone disappoints
Apple chip suppliers also take a hit on disappointing report
Perkins's remarks show tech's 1% class has little of it
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