A mammoth $50bn has been sliced off Apple’s share price after Wall Street analysts predicted troubled times ahead for the technology giant.
The huge fall came after banks, including Barclays Capital and Credit Suisse dropped their price targets on the company’s shares, reducing the average to $612, a fall of some $132.
Analysts fear Apple’s extraordinary period of growth over the past few years could reach a plateau.
It may seem surprising after Apple recorded record profits of $13.1bn in the first quarter of 2013, but the figures were just a little higher than Apple made in the same period the previous year, making investors nervous that the company is showing signs of a marked slowdown.
Shares plummeted by 12 per cent on Thursday, recovering only a fraction by late morning to rest at $461.5.
And that is despite strong sales – 47.8m iPhones were sold, an increase of 39 per cent and 22.9m iPads were sold, up by 64 per cent. No figures have been released for the new iPad Mini, but it is understood to be selling well. Mac sales were, however, down by 15 per cent, but Apple does have some slack, with cash reserves totalling $137bn.
The fear though that the slowdown could be a permanent sign of things to come at Apple has led to the new target predictions, and the new share prices.
Peter Misek at Jefferies & Co cut his share price target by $300 to £500, saying the sales slowdown was “material and here to stay”.
Worries centre around the ever developing competition Apple faces from rival technology firms, including bitter combatant Samsung. Since the launch of iPhone and iPad, other companies have also upped their games considerably.
With many rivals now concentrating on developing markets, analysts also raised concerns about a fall in demand for Apple’s gizmos in China.
Just how Apple should arrest its share price fall is now the subject of much conflicting debate.
While some experts say the company needs to compete with the cheap Android devices coming on to the market by releasing a range of cheaper smartphones, others say such a move would dilute its high-end image, leading to customers who buy Apple for the exclusivity factor to go elsewhere.
Analysts Evercore Partners said: “Apple’s modus operandi to date has been to cream the high-end off each market but, as the company has grown, it may now need to target more of the mainstream.”
Others questioned whether Apple’s strategy of concentrating on just a handful of devices was working, saying it needed to come up with a completely new type of gizmo.
Lots of rumours are currently doing the rounds about the direction Apple will take next. Leaks and analysis have suggested a low-cost iPhone mini could be on the way, that the next iPhone will come in a wider range of colours or that Apple is gearing up to take on the television market.
The latest expectation is that Apple is planning to launch the iPhone Plus, a larger version of the device that would compete with Samsung’s Galaxy Note. We’ll just have to wait and see what Apple does next – and whether it manages to restore investor confidence.