What's Causing the Apple Sell-Off?

In the following video, senior technology analyst Eric Bleeker talks about Apple's (Nasdaq: AAPL  ) wild ride over the past couple of weeks. In particular, he takes aim at some misguided storylines that have gotten quite a bit of media attention.

First off, Verizon (NYSE: VZ  ) reported results last week, and iPhone sales were off about 24% from the holiday quarter. Coming into Apple's report this Tuesday, most analysts seem to be clustering around a 16% to 20% drop in iPhone sales from last quarter, so media reports -- and analysts -- were quick to pick up on this data point as a reason Apple could miss expectations this Tuesday.

However, that storyline appears bogus. First off, Apple continues to hold greater than 50% market share on Verizon, and that's a pretty positive long-term sign for the company in its own right. Second, the United States was never going to carry the iPhone to its lofty expectations this quarter. Instead, the main driver of iPhone sales will be in markets such as Brazil and China, where the iPhone 4S was released right before the quarter ended -- or, in China's case, wasn't released even released during the December quarter. To me, having U.S. sales within striking distance of analyst targets and allowing upside for more growth in foreign markets where the iPhone 4S didn't hit until last quarter is a positive heading into Tuesday.

Second, analysts homed in on weaker-than-expected guidance next quarter in key Apple supplier Qualcomm's (Nasdaq: QCOM  ) chipset division. The line of thought surrounding Apple was that Qualcomm's guidance suggested that Apple could be light next quarter as it "de-stocked" chipsets for the iPhone 4S in preparation of an LTE-enabled iPhone 4 in September or October. Qualcomm actually slightly bumped its full-year profit target, so the picture on long-term demand seems to be in place. This seems like a lot of quarter-over-quarter noise and doesn't say much about the long-term picture of Apple's success.

So we have a lot of people seeking out explanations for Apple's fall, but the simplest explanation is probably the best: The company has been on an absolute tear this year, and a slow-down was inevitable.

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Eric Bleeker owns shares of no companies listed above. The Motley Fool owns shares of Qualcomm and Apple. Motley Fool newsletter services have recommended buying shares of Apple and creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (9) | Recommend This Article (25)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 21, 2012, at 9:26 PM, bbrriilliiaanntt wrote:

    Agreed, buying right up to earnings if more retreat, hope so!

  • Report this Comment On April 21, 2012, at 9:45 PM, yyj wrote:

    I hope you are right. there are few things i still doubt of it.

    First, the othe analysts should also counting the sales in china too.

    second, the chart of AAPL looks like heading to get below 50 days EMA line, which is only $6 or 1% more to hit it, in the trend like like this, it will be very easy to get below 50 days EMA. I guess some big players are just trying to get AAPL lower.

    Third, if the AAPL really beats it, it will jump, right? there should be a room for it to jump harder, that is one of the reason i guess the big players try to do. in other hand, if the AAPL fails, then since if the big player already make it below 50 days EMA, which mean, it will drop harder. in one word, BIG PLAYERs are playing it now. i guess AAPL will rise a little bit in Monday, but drop in Tuesday.

    how do you think?

  • Report this Comment On April 21, 2012, at 11:41 PM, Mega wrote:

    When asked what the stock market would do next, John Pierpont Morgan replied, "It will fluctuate."

  • Report this Comment On April 22, 2012, at 12:38 AM, lojikfool wrote:

    Nice one Eric, couldn't agree more. The see-saw has just tipped a bit more to fear rather than greed last week. The greed will be back on Tuesday night when Apples TTM FCF / EV - LTI Yield hits 15%.

    Apple will not pop too much though, maybe only mid to high 600s, for the same reason it's still so undervalued, anchoring and the demand supply equation on Apple's shares straining on the demand side as all the smart money is already maxed out overweight. That's fine for Apple shareholders though, we can just wait for those share buybacks and dividends to ramp up.

    Will Apple's reign end? Certainly. When will it end? Maybe in 5-10 years leaving plenty time to make hay whilst the sun shines. With the 15% above Apple can buy back all it's current shares at the current price within 7 years assuming no growth.

    I've never seen such a no brainer in my 25 years of investing.

  • Report this Comment On April 22, 2012, at 12:41 AM, lojikfool wrote:

    I loved the Forbes headline "Apple at $580: Christmas in April" lol

  • Report this Comment On April 22, 2012, at 1:18 AM, applefan1 wrote:

    Jan - Mar sales are always lower than Oct - Dec., then it goes till Oct and then goes back up. Look at year to year qtr to qtr sales for Apple. Then look at the products they are going to announce.

  • Report this Comment On April 22, 2012, at 4:16 AM, mesmd wrote:

    Aapl will go to 7-800 if everyone just gives it the proper time, like by year end 2012. This volatilility is part of the climb. Just look at its incredible current annual performance! It ca not just keep going up everyday without the profit taking and necessary corrections. Its products are still the best and not much has changed, other than all the worry and paranoia being played by those trying to get you to sell so they can buy it for lesson these temporary pullbacks!!

  • Report this Comment On April 22, 2012, at 2:46 PM, Risky88 wrote:

    I have a question!

    If the iphone is 50% of verizons phone sales and they have a drop in 20% in iphone sales. Isn't that really bad for apple potentially, because there is such a large stake. For instance if verizon sells 100 phones through the quarter that means 50 of them were iphones. 20% of the 50 would mean 10 less phones which means they sold more samsungs or nokias etc.

    I just want someone to explain why that wouldnt be bad, maybe I'm just having a brain freeze and not seeing the bigger picture.

    I totally do agree that apple could explode internationally, kinda of like how it exploded in the USA.

    This is my question about the international sales.

    Everywhere you go in the world, the culture is different.

    For instance in China I hear a lot that the people are not a lot like Americans, they do not spend as much money, they save tons more. The cheap flip phone is just fine, it does what its intended to do. To me this could be because people do not have as much extra income.

    My other question

    I have read articles saying that apples marketshare in some euro countries has gone down substantially and in some euro countries is gone up substantially. I don't remember the exact numbers because it was sometime last fall.

    Besides my first question, I'm just putting this stuff out there for a couple of thoughts.

  • Report this Comment On April 22, 2012, at 3:41 PM, ade61 wrote:

    Apple stock price will continue to decline.

    To get a clear picture of why Apple Stock is a bubble, see adelaw61.blogspot.com

    My analysis is correct, Apple's earnings will stagnate along with its stock price, due to their considerable size. If you wish to believe otherwise, it is a free country. But Remember a fool’s money can easily be stolen. Wall Street does it on a daily bases. So be one of the herd and buy some more Apple Stock and get RICH quick. Good Luck

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