AAPL: Death Cross? March Disappointment? Piper Rebuts Stock Drop
By Tiernan Ray - December 5, 2012, 2:00 P.M. ET
Apple‘s shares remain under pressure this afternoon, continuing their sharp fall from the open, currently
down $27.64, or 4.8%, at $548.22, on what could be a host of various concerns.
Piper Jaffray analyst Gene Munster was in touch a short while ago by telephone to offer a couple of
suggestions. Munster concurs that this morning’s article by DigiTimes projecting a sharp drop in
component orders by Apple for its March quarter may have spooked investors.
For a variety of reasons, however, Munster tells me “the DigiTimes article doesn’t change how we think
about our estimates for this quarter or next quarter.”
In particular, Munster thinks any decline in component orders now for shipments of the iPhone 5 in March
has to be placed in the context of what may be much higher December quarter sales:
We believe this 20% decline is to be expected coming off of a launch quarter and do not believe it is an
indication of how units might trend in March. As an example, if Apple ordered 52 million iPhones from the
channel in December and 48 million are sold, that implies a 4 million unit channel fill and 41.5 million units
ordered from Apple in March. That would mean 44.5 million units would be available for sale in March,
which would mean our 43 million iPhone estimate for March is well within the range of probability.
Another possibility is what’s known as the “death cross,” a phenomenon in charting when a stock’s 50-day
moving average crosses its 200-day moving average, says Munster. Apple’s 50-day price average is
$608.41 while its 200-day is $600.91. In his note this afternoon, Munster writes,
Apple’s simple 50 day moving average is nearing its 200 day moving average, which is a negative technical
sign. Based on our conversation with Piper Jaffray Technical Analyst Craig Johnson, we believe that for this
technical indication, most of the damage has been done to AAPL, but there could be a worst case additional
10% move to the downsidewhich could be the next meaningful area of support.
In Munster’s view, however, the stock should be able to avoid an additional 10% downside despite
technicals given that the stock has historically reflected its financial performance.
Likewise, the talk of higher margin requirements on trading Apple is “not a big deal,” he thinks. It’s not clear
just how much Apple trading is leveraged, he observes. But, again, he thinks the fundamentals with Apple
end up outweighing such trading issues.
Further down the list of causes, opines Munster, might be investors having expected a special one-time
dividend given the prospects for rising tax rates on dividends next year. While the desire is understandable,
Munster tells me investors should never have expected such a change prior to the end of the March quarter,
which will be the one-year anniversary of the inauguration of the dividend.
Munster tells me he has heard investor concern that today’s announcement about Nokia‘s ( NOK)
“Lumia 920T” for China Mobile‘s ( CHL) network means the world’s largest mobile phone carrier may
decide not to carry Apple’s iPhone 5. Munster thinks such speculation is “ridiculous.”
“Why would it need to be mutually exclusive?” asks Munster. The Lumia has a lot of momentum,
he concedes, but carry multiple devices seems to him to be part of the normal course of business.
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