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Apple's (Nasdaq: AAPL) stock dropped by US$8.81, or 6.1 percent, to $134.89 on Tuesday following AT&T's (NYSE: T) report that it had activated just 146,000 iPhones during the first two days of the iconic multimedia device's release. That number fell far short of many industry estimates.
The iPhone went on sale with much fanfare at 6 p.m. on June 29. Apple devotees, or their paid proxies, lined up hours in advance to get their hands on the much-coveted gadget. It was widely -- albeit anecdotally -- reported that Apple and AT&T had cleared store shelves of the product during the first weekend. Some estimates put the number of iPhones sold at 500,000 to 700,000.
Although acknowledging that the decline in Apple's share price was linked to concerns that iPhone sales were not keeping pace with expectations, profit-taking and some pre-earnings jitters also affected trade, noted Frederic Ruffy, an analyst with the investor education firm Optionetics.
Mixed Reviews
The analyst community is having a difficult time reaching consensus over what the latest developments suggest, Ruffy told MacNewsWorld.
"For example, CIBC said Tuesday that demand for iPhones has seen a significant decline during the previous 10 days," he pointed out. "However, UBS said that they believe the launch of the iPhone was a big success. There seems to be a sense of uncertainty about the recent sales of iPhones."
One mitigating factor in Tuesday's decline is that it came amid a broad sell-off in the equity market, and some of the losses in Apple were the result of poor market conditions.
Investor Profit-Taking
It was the uncertainty -- perhaps even more than the numbers themselves -- that motivated some profit-taking on the part of Apple investors. The climate is certainly favorable: Over the past few years, Apple Computer has risen more than twelve-fold, Ruffy noted.
"From a low of $10.59 in January 2004, shares rose 21.5 percent in 2004, 123.3 percent in 2005, 18 percent in 2006 and, even after [Tuesday's] slide, [Apple] is up 59 percent for 2007," he said.
Another wild card is Apple's earnings report, which is due Wednesday afternoon. Some of the selling was probably associated with pre-earnings jitters, according to Ruffy.
"While iPhone sales are not expected to contribute much to second quarter earnings -- because only two days of sales were probably recognized -- investors will be listening closely for guidance regarding future sales. Some might have decided to book profits in Apple rather than stomach the uncertainty and potential volatility associated with news," Ruffy suggested.
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