The Apple (AAPL +1.20%) bears are back in town.
After a couple of weeks of a rebound, Apple shares got absolutely hammered today. The stock closed down over $37 near the lows, representing a loss of over 6.4% for the largest tech company on Earth. That also translates into a market cap loss of almost $35 billion.
That can't be it
There weren't any clear indications on why investors were dumping their shares, at least if you don't consider an analyst upgrade to "strong buy" a reason to sell. Oracle Investment Research boosted its rating on Apple from "buy" to "strong buy" with a $670 price target, nothing that certain valuation metrics are at 10-year lows.
Apple's enterprise-value-to-EBITDA is currently lower than at any point over the past decade, while the company's supply situation continues to improve and product demand remains robust. That certainly can't be why Apple's down so much today.
Technically speaking
The ominous sounding "death cross" has now been spotted on the horizon by chart watchers, potentially rattling traders that subscribe to technical analysis. That scary phrase refers to when a stock's 50-day moving average crosses below its 200-day moving average. Those two magical lines haven't crossed yet, but at the rate that Apple's trading, it could happen by week's end. With both of those moving averages trending lower, the theory goes that more downside is on the horizon.
Too bad it's a bit bogus. Heck, investors are still waiting for the market crash predicted in August 2011 when the Dow Jones Industrial Average formed that fatal pattern. Technical analysis has nothing to do with Foolish long-term fundamentals, but enough investors buying into them can cause some turbulence in the short run.
As a former registered stockbroker that worked extensively with active day traders, I can vouch that they do tend to be a rather superstitious (and fickle) bunch.
Margin calling
There's also talk that some selling pressure could be coming from increased margin requirements at COR Clearing. The clearinghouse has reportedly boosted requirements from 30% to 60% based on "high concentration."
Generally, leveraged investors that are required to maintain certain equity thresholds in their portfolios may be forced to liquidate positions if faced with increased requirements. COR Clearing doesn't service retail clients, but instead primarily works with broker-dealers and investment advisors.
Heightened margin requirements can create selling pressure, but again this trading has no bearing on the company's actual business.
Not so special anymore
Some investors have been calling for a special dividend, since they figure Apple has nothing better to do with its $120 billion money mountain. The odds of Apple giving back a big chunk of change just because it can is rather remote, and that might be disappointing some investors as other companies have opted to do just that in recent times.
The aforementioned research note from Oracle Investment Research specifically says that increased share repurchases would benefit shareholders more than a special dividend when you consider those low valuation multiples.
With the fiscal cliff coming up, several companies have paid out special dividends in advance of potential tax hikes investors may face on dividend income. For example, Costco (COST 0.40%) just announced a $7 per share dividend, totaling $3 billion. Las Vegas Sands (LVS 0.39%) is giving back an additional $2.75 per share to investors. Both Costco and Las Vegas Sands have enjoyed healthy gains since, as investors are happy to get some holiday spending money.
Keep your eye on the iBall
When it comes down to it, all of these storylines that are potential reasons for the monster sell-off are just noise. They don't relate to somewhat justified concerns like the supply constraints that Apple was facing through much of the quarter or escalating competition in the tablet market.
Apple had rebounded by almost $90 per share, or 18%, over the past three weeks. Chances are the bulls are just taking a breather and giving the bears a day or two (even if some of them aren't so good at math) before resuming the upward march.
The next earnings release can't come soon enough.
