Apple (NASDAQ: AAPL) tumbled into a bear market on Wednesday after Guggenheim Securities analyst Robert Cihra cut his rating and earnings estimate. As Cihra put it, higher average selling prices for iPhones are “no longer enough” to offset weakening iPhone unit sales.
The stock hit a four-month low, taking its market cap below $900 billion for the first time since May. Currently, AAPL is down just over -8% for the week, -11.39% in the last month, and -19.98% from its high reached on October 3.
There have been growing concerns around declines in iPhone unit sales in the next few years, and Apple has fanned those fears by reporting iPhone shipments have missed Wall Street’s expectations for the quarter. The company also said that it will cease reporting how many iPhones it sells, something that many see as a sign that Apple’s largest segment by revenue is set for weaker growth in the years to come.
“It’s like Tim Cook opened up Pandora’s Box by pulling the unit metrics on iPhone shipments,” Wedbush Securities’ Daniel Ives told. “As there’s less transparency in the story, investors have feared that Apple’s trying to hide decelerating unit growth. When you see general nervousness across the tech space, combined with expectations that Apple was going to carry the weight of the FANG names… it’s kind of been a perfect storm.”
A storm, indeed. As Apple has begun to shift its focus from having its success dependent on the volume of devices purchased to delivering luxury products and services sales, it has sent shockwaves through the technology sector, especially for the company’s biggest semiconductor suppliers, which have reported significant order volume declines.
One such supplier, chipmaker Lumentum (NASDAQ: LITE), has dropped nearly -30% this week after reporting that one of its largest customers had reduced its order from the company. While it didn’t outright name Apple, Wall Street guessed the iPhone maker was the culprit.
“You’re talking not just about what Apple represents, but its effect across the whole food chain, including semiconductors,” Ives said. “As the core ‘FANG’ names have just taken gut punches left and right over the past few months, this latest downturn for Apple—the degree of it—has really caught investors off base.”
Apple as a bellwether for the broader sector is leading the flock of tech stocks further down. That sector decline has led the U.S. equity market into its fifth straight down day on Wednesday.
The company’s tumble from its October highs marks the eighth Dow component to enter bear market territory, including fellow tech sector stocks IBM (NYSE: IBM) and Intel (NASDAQ: INTC). The Dow closed Wednesday -6.5% lower than its October 3 record high of 26,828.39, the same day Apple reached its peak.
Should Apple continue to decline, it won’t be surprising to see the tech sector and the Dow fall right along with it.