The sound you heard on the roof today was the sky falling as as investors worried about all these reports of Apple cutting iPhone orders. In the process, shares of $AAPL fell to US$485.92, a loss of $15.83 (-3.15 percent), the first time the stock has been below $500 for almost a year.
AAPL Chart for January 15th, 2013
Source: Yahoo! Finance
Investor sentiment has shifted markedly on $AAPL in the last four months. When once the company could do no wrong, now investors see disaster behind every Samsung commercial and Amazon tablet release. The iPad mini is too expensive, the iPhone 5's screen isn't big enough, the competition tablets are simply too cheap, and surely that will finally result in iPad losing share, RIGHT?
Oh sure, Apple's retail stores remain packed to the gills (and unlike Samsung's CES booth, people in the Apple Stores actually play with the devices on hand), the company continues to gain share in a declining PC market, and Apple appears to be gaining significant smartphone share in the U.S., but that doom and gloom must be based on something, RIGHT?
It's these order cuts that have been plaguing Apple's stock the most in recent weeks. Sources in Apple's supply chain told The Wall Street Journal and other outlets that Apple had cut orders, and the natural reaction to that was to assume iPhone demand is lacking.
I've repeatedly written that there are a handful of analysts whom I respect above all others when it comes to Apple, and Sterne Agee's Shaw Wu is at the top of that list. His own sources within Apple's supply chain have been consistently reliable, and Mr. Wu understands Apple's business model and its methods, to boot.
The question ringing in the back of my head as the order cuts story built was simply, "What does Shaw Wu have to say?" Earlier on Tuesday, I got my answer when Mr. Wu released a research note addressing this specific issue.
According to him, iPhone demand remains "robust," and the order cuts are about improving yields on key components and two supplier changes. It runs counter to the current meme that Apple is choking, that Tim Cook can't deliver innovation, and that Android is the bee's knees and everyone wants big screens on their smartphones, but reliable analysis can be like that sometimes.
Headlines about Apple—like this one: "Six Reasons Why I Still Wouldn't Own Apple Stock"—are written by people who don't understand the value proposition of Apple's business model and have absolutely zero historical context for how Apple does business. It's the same-old nonsense we've been hearing from Apple haters (or in this case, the Apple-ignorant) since the iPod was released in 2001, and to a lesser extent since the iMac was released in 1998.
People that crow with delight about Tim Cook's failure to deliver an innovative product can only do so by not paying attention to Apple's own historical track record of market disruption. If in two or three years Apple hasn't released something widely heralded as innovative, then you can begin to question Mr. Cook's ability to lead Apple. My educated guess is that we'll see something this year, but time will tell.
In any event, I believe that there are a lot of Chicken Littles running around pecking at the ground and worrying about Apple's sky falling, while in Cupertino, things continue to run well.
Apple continues to gain smartphone share while maintaining iPod-like share for the iPad. The Mac continues to gain share, and Apple's ecosystem continues to offer an unmatched experience for consumers. Apple will probably turn in yet another record quarter for December, and 2013 will also probably be another record.
Personally, I'm not paying attention tot he Chicken Littles. We get numbers for the December quarter and guidance for the March quarter from Apple next week. When we do, I expect that Shaw Wu's analysis will once again be spot on. Eventually investors will cotton to what's really going on.
*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.