Why Apple Lagged Today
Shares of Apple lagged the broader market today, down by as much as 1.6%. There were a couple of negative news pieces today that could be behind the Mac maker's underperformance.
Can a Retina iPad Mini wait?
DIGITIMES reported that Apple may be forced to delay the release of a Retina iPad Mini, and that Apple hasn't finalized plans for the device yet and is still considering whether or not to make the move to a high-resolution display in the smaller tablet. Investors have come to widely expect a Retina iPad Mini this year, addressing the device's biggest weakness. However, that's much easier said than done since there are engineering challenges that present trade-offs for how the iPad Mini is positioned.
The Taiwanese publication says that the fifth-generation iPad is on track for a September launch, and should receive a redesign similar to the iPad Mini along with other internal improvements. Consumers are quickly shifting toward smaller devices, and a non-Retina iPad Mini may not remain competitive for another year amid intensifying tablet completion in small-sized segment.
Amazon.com's Kindle Fire HD has a much beefier display and that was released last year. The e-tailer also just cut prices and the tablet now costs just $169. Google's Nexus 7 also has the same display specs. Both Amazon and Google are expected to upgrade their respective flagship tablets within a matter of months, and waiting until 2014 for a Retina iPad Mini might be too long.
Wedge Partners analyst Brian Blair also believes that Apple has reduced its iPhone orders for the second half of the year by 20%, due to slowing growth in the high-end that's become readily apparent following figures from Samsung and HTC. Blair estimates that Apple is targeting 90 million to 100 million iPhones in the second half, down from 115 million to 120 million units. Those totals include Blair's estimates for all iPhone models, including unreleased ones.
Apple's iPad production plans are unchanged, Blair believes.
Bring Rubinstein back?
Global Equities analyst Trip Chowdry was also out with some bearish comments, saying that Apple's management has "destroyed" shareholder value through a lack of recent innovation. Chowdry is skeptical of Apple's bond offering and buyback program. Apple's incremental improvements to the iPhone aren't enough to disrupt the market anymore, and Apple's low earnings multiple shows how little respect the company is garnering.
Chowdry also believes that Apple risks losing key talent to rivals in the near future. Strangely, he also suggests that Apple replace Tim Cook with ex-Palm CEO and former Apple exec Jon Rubinstein.
The silver lining
One of the only positive notes on Apple today comes from Stifel Nicolaus analyst Aaron Rakers, who is sticking with a buy rating and $600 price target on the believe that gross margin is better than investors believe. The drop in profitability last quarter was partially driven by depreciation and amortization expense and conservative warranty expenses.
As the capital intensity of Apple's business stabilizes going forward, the company could see some upside to gross margin.
Apple's sentiment today is mostly negative, considering these headlines, which is why the Mac maker sat on the sidelines during today's broader rally.
The article Why Apple Lagged Today originally appeared on Fool.com.Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, and Google. The Motley Fool owns shares of Amazon.com, Apple, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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