Shares of Apple Inc. continued to drop Friday, declining more than 3.7 percent to end the week at US$509.794, down $19.896 (-3.76 percent), on heavy volume of 36 million shares. The prime catalyst appears to be a research note from UBS Investment Research analyst Steven Milunovich, who cut his price target from $780 to $700 and lowered estimates for fiscal 2013 and 2014.
$AAPL Chart for December 14th, 2010
Source: Yahoo! Finance
Mr. Milunovich's concern is not for the current quarter, but rather for next quarter and beyond. Based on checks with the supply chain, the analyst said that the build rate for iPhone for the March quarter to 25 million units, reportedly because Apple wants to balance excess supply.
Based on that, Mr. Milunovich cut his iPhone unit forecast for the March quarter to 41 million units, down from 46 million. He cut fiscal 2013 earnings estimates to $47, down from $51.50, and that's below consensus estimates of $49.63
Another factor weighing down $AAPL on Friday was the iPhone 5 launch in China. Reports are that the launch was greeted with no lines seemingly little fanfare. To that end, Mr. Milunovich said some of his sources in China do not believe the iPhone 5 will do as well as the iPhone 4S did in that country.
The analyst's third reason for lowering estimates and cutting his price target was increased concern that iPad mini is having more of a cannibalization effect on Apple's own iPad with Retina Display than he previously though. He wrote that, "Sustaining a 20 million iPad run rate" won't be easy for Apple.
Lastly, he is concerned that Apple will have trouble maintaining growth rates in Europe due to the macroeconomic conditions on the Continent and increased competition.
Peter Misek of Jeffries & Co. also cut his iPhone estimates for the March quarter, citing similar reports from the supply chain that Apple is cutting orders for iPhone.
$AAPL is down $192.306 from its closing high of $702.10 on September 19th, a decline of 27.3 percent.
*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.