) shares entered bear market territory on Wednesday, falling
below $560 -- a more than 20 percent decline from the all-time
high shares hit back in September.
Bond king Jeffrey Gundlach appeared on
. Gundlach said that, even down 20 percent, shares were likely to
fall further and might not find support until $425 or so.
Gundlach's bearish thesis is
. The fund manager made negative comments on Apple earlier in the
year, noting that there was an extreme obsession with the stock,
and that the "rainmaker" -- Steve Jobs -- is now gone.
Apple bears frequently point to the widespread ownership of
Apple as evidence that the stock is exposed to downside risks --
potential future buyers are limited, as everyone already owns the
stock, and should the share price fall significantly, there could
be a "rush for the exits" wherein shareholders panic and begin to
dump their shares.
There are other issues facing Apple, too. With the re-election
of Obama in the U.S., taxes on capital gains may increase next
year. As Apple has rallied significantly, many investors may be
sitting on large, unrealized capital gains -- gains that might be
better to take now when tax rates are lower, as opposed to
waiting to some future date when capital gains taxes are
Of course, there is no denying that Apple is an enormously
profitable company with billions on its balance sheet. Yet,
shares have run up significantly since the start of 2012,
appearing to trade on momentum. The announcement, or anticipation
of a new product or product refresh has propelled shares. But
with the iPad Mini now available, and no significant refreshes
seen on the horizon, the expectations that drove the stock higher
have all but vanished.
Other factors may have lead to a loss of investor confidence
Apple has always been known for the high quality of its
operating systems. But the most recent incarnation of Apple's
mobile operating system, iOS 6, has called this assumption into
question. The company was widely criticized for its poor maps
application, which led to a publicly apology and the departure of
iOS head Scott Forstall.
Interestingly, Forstall may have suspected that new challenges
were on the horizon -- he sold
almost all of his shares months ago
Apple also axed John Browett, the head of retail.
Apple shares traded near $560 on Wednesday, down over three
percent on the session.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.