Are Analyst Expectations Killing Apple's Stock?

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Apple's (NASDAQ: AAPL ) value has been plummeting for more than three months. Many critics have blamed it on a lack of fresh and creative products, disappointing sales figures, managerial problems and a number of other issues within the firm. While those factors might be contributing to Apple's decline, investors might need to reconsider their position.

Reports out of China claim that iPad Mini and iPhone 5 demand is so high that some Foxconn employees will be forced to work during the Chinese New Year. Flexium Interconnect, another Apple supplier, plans to do the same.

Without a firsthand investigation into these suppliers and every plant they operate, it is impossible to verify the accuracy of this report. However, this is not the first time that demand inspired (or perhaps required) an Apple supplier to work during the holidays. In 2011, one supplier reportedly offered its employees triple pay to work through China's Lunar New Year. At the time, the iPhone 4S was in high demand and broke numerous sales records worldwide.

This year is not much different. The iPhone 5 has already broken two different sales records . Because of these and other past achievements, analysts expect Apple to announce that it sold 47 million units during the fiscal first quarter.

If this prediction is accurate, the iPhone 5 will become the fastest-selling smartphone of all time, beating its predecessor by several million units. However, if the Phone 5 sells anything less than predicted -- 42 million units, perhaps -- investors will be under the impression that the device fell below expectations.

That right there is the core problem behind analyst estimates. Any analyst can make any claim that he or she wants. It could be outrageous (one analyst believed the iPhone 5 would sell 10 million units in one weekend) or impossible (another analyst believes that Apple will sell more than 10 million televisions in America next year). If the prediction is made, however, investors take notice. When Apple fails to live up to whatever lofty expectation analysts have concocted, investors then think it is time to sell.

To be fair, the investor sell-off is not unwarranted. While the iPad Mini appears to be a hit , Apple was reportedly forced to release the iPad 4 due to the lagging sales of its predecessor.

The company also embarrassed itself and its corporate team when it chose to replace Google Maps (NASDAQ: GOOG ) with a . That app of Australian drivers and caused headaches for consumers throughout the world.

Apple could also be criticized for a genuine lack of innovation. Only the was truly unique. Unfortunately, the hefty MSRP ($2,199 for the base model) ensured that the computer won't break many sales records.

The iPhone 5 is a nice device, particularly for those who did not yet have an iPhone or were still using an old model. It is not, however, the grand-scale, highly-innovative product that many were expecting. It is merely a more polished version of the iPhone 4S.

The same can be said for most other Apple upgrades this year, including the iPad 3 and 4, as well as the iPad Mini.

These are all viable reasons to abandon Apple's stock. The same cannot be said for headline-grabbing analyst estimates, which are often inflated and are rarely realistic.

Apple is down nearly one percent this morning. The company has lost more than nine percent of its value over the last six month but is still up 25 percent year-to-date.

Follow me @LouisBedigianBZ

(c) 2012 Benzinga does not provide investment advice. All rights reserved.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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