Apple (NASDAQ: AAPL ) isn't doing very well these days.
The stock broke below $400 on Wednesday, and today the shares are trading at their lowest level since late 2011.
The bearish trend comes just as the consumer tech giant is ready to report quarterly results next Tuesday. At prices this low, one would think that even ho-hum news will be applauded by the market next week, but things can always get worse.
Let's go over a few things that can send this already battered stock even lower.
1. Earnings can fall short of expectations -- again
Investors have known for months that Apple will be reporting lower quarterly earnings -- something that hasn't happened in 10 years.
The vinegar salt in the wound is that analysts have been scrambling to lower their profit expectations in recent weeks. As secondhand reports suggest a softening of tablet, smartphone, and PC sales, projections have been hosed down.
Wall Street's betting on a profit of $10.13 a share out of Apple. The target was $10.18 a share last month, $10.24 a share two months ago, and $11.84 a share three months ago.
Since the trend is heading lower, it means that the fresher updates have been negative. This suggests that Apple may miss on the bottom line, and that in of itself wouldn't be a surprise. Apple has missed Wall Street's income estimates in three of the past five quarters. It would still be a blow to some bulls lamenting the days of Steve Jobs when Apple would consistently trounce the market.
2. Revenue growth can decelerate too fast
The bearish case against Apple revolves largely around deteriorating margins, so even worrywarts may not realize that analysts now see Apple's top line growing in the single digits this quarter. Wall Street's eyeing just 8.9% in revenue growth to $42.68 billion.
A miss here would probably be even more catastrophic than a sharper decline in profitability.
Did you see Nokia (NYSE: NOK ) today? The wireless handset pioneer was crushed after reporting quarterly results. It actually beat expectations on the bottom line by posting a narrower deficit than what analysts were projecting. The rub at Nokia is that shipments and revenue fell well short of market forecasts.
Even if Apple delivers on the bottom line, if revenue comes in weak, you can expect a fresh wave of analyst downgrades as Apple's relevance takes another hit.
3. Apple may not raise its dividend
Apple has more cash on its balance sheet than any other company, but it's been stingy.
A cascading share price has helped prop its yield above 2.6%, but investors believe that Apple should just crack open its billfold to push its quarterly dividend even higher. At the very least, Apple should be aggressively buying back its stock at this point.
If Apple doesn't push up its payouts, investors will wonder why it's being so protective of its dormant cash. Even if it has to take a repatriation tax hit by bringing some of its overseas cash home, Apple not putting its money where its mouth is here and returning money to shareholders would be a disappointment.
4. Innovation in hibernation
Revolutionary products have gotten Apple out of lulls in the past, but what will the next iPod, iPhone, or iPad be? We know that Apple isn't out of ideas, but what if potential catalysts are delayed?
Apple has to realize that there's a crisis among investors here.
If the tech bellwether can't at least suggest that there are reinforcements of the iOS army on the way, why would anyone believe that Google isn't cornering the market?
It's merely a coincidence that Apple will report just days before seven domestic wireless carriers begin stocking the bar-raising Samsung Galaxy S4. This is the part where the preacher at a church wedding turns to the crowd, asking them if anyone has a reason why a smartphone buyer shouldn't hook up with Samsung's new Android-fueled smartphone. It's not a moment for Apple to be silent.
If there was ever a time for Apple to give shareholders and consumers hope, Tuesday afternoon would be it.
The clock's ticking higher. The shares are ticking lower. Something's got to give.
Got Apple? Get smart.
There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.