Supply Chain Snags Weigh Down Apple's Stock
Wall Street analysts who track those who supply the parts for Apple's phones and tablets are taking a hard look at those numbers, and they don't like what they see. All that fueled the latest round of negative news that included stock price drops, analyst downgrades and new worries that Apple may be losing some key talent in the next few months.
03/13/13 5:00 AM PT
Jefferies on Tuesday became the latest Wall Street firm to downgrade its Apple price target as it blamed a delay with an iPhone product launch and slower smartphone sales.
Analyst Peter Misek trimmed his target price from US$500 to $420. Several other analysts also have downgraded the stock since it fell from its $705 peak last September. It is currently trading around $428.
Misek said in a research note that the company had been planning to launch an "iPhone 5S" in June, but supplier troubles with casing colors were causing a delay in operations. Instead, he predicted Apple will launch a new smartphone in late summer or early fall -- about a year after the iPhone 5's debut.
Apple did not respond to our request to comment for this story.
Stock Volatility Is Sticking Around
Apple's stock began the week with a better start than seen in recent weeks, spiking in the afternoon more than 1 percent to hit $438. The increase was likely due to reports that Apple would announce what it has planned for its massive cash hoard.
Negative reports about Apple's supply chain woes, however, brought the price back down again on Tuesday. It fell about 2 percent throughout the day to close at $428.43.
That volatility and recent analyst downgrades aren't indications that serious trouble is afoot in Cupertino, said Trip Chowdhry, senior analyst for Global Equities Research. The company has a hold on several key markets and an infamous cash pile to bail it out of any trouble, but with sluggish sales and no new product in the next quarter or Apple's stock probably isn't going to be a Wall Street darling.
"Apple is still a company that other companies look to and want to be," he told MacNewsWorld. "But investors are uncertain about what the company is going to do next, and the market is getting really competitive. Apple hasn't made any big moves lately and the supply chain and the stock is going to reflect that."
Talent On Its Way Out?
The lack of new products has Apple observers wondering if some of the company's top talent is thinking about taking their skills elsewhere.
In a radio interview featuring Daring Fireball's John Gruber and iPhone developer Guy English, the two discussed whether some of Apple's finest engineers might feel better working elsewhere in Silicon Valley. During the conversation, they noted that the culture at Apple doesn't give some of its most creative and innovative workers a chance to pursue initiatives in other areas, where they would get more recognition, money and satisfaction.
That's not necessarily a bad thing for the company, however, said Joseph Pastore, professor emeritus at Lubin School of Business at Pace University.
"Entrepreneurial-minded individuals taking a de facto leave from Apple may actually be beneficial to the firm," he told MacNewsWorld. "If they hit upon a new direction, they will need the financial and brand strength of the established firm to make it work. Sometimes innovation is spurred more by allowing entrepreneurially-minded individuals to separate from the more bureaucratic, permanent organization and go off on their own, less impeded by organizational constraints and politics."
Losing talent isn't a concern that is specific to Apple, Pastore pointed out. It's a popular Silicon Valley refrain, and Apple won't let it dictate how the company operates going forward.
"There will always be shifting competition, and the intensely entrepreneurial nature of the sector will always have shifting alliances and changing personalities. To the extent that is happening at Apple, it is no surprise, nor should we see it as a game changer. Apple won't let that happen"