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December 9, 2012

Why is Wall Street losing its appetite for Apple?

SAN FRANCISCO — This holiday season is shaping up to be a record-breaking period for Apple as shoppers snap up iPhones and iPads. So, why is the world’s most valuable company losing its luster with investors?

Apple began selling the iPhone 5 on Sept. 21, the same day the company’s stock hit an all-time peak of $705.07 per share. Since then, the stock has plunged nearly 25 percent, trimming the company’s market value by more than $150 billion. On Friday, the stock fell almost 3 percent and closed at $533.25.

The sell-off has had broad impact. It has reached beyond Apple’s own stockholders because the company is the largest component in the Standard & Poor’s 500 and Nasdaq composite index — two benchmarks that are tracked by widely held mutual funds and exchange traded funds, or ETFs.

Apple comprises 4 percent of the S&P 500 and nearly 12 percent of the Nasdaq, according to FactSet. The Nasdaq has shed 6 percent since Apple’s stock price peaked while the S&P 500 has declined 3 percent, the same as the Dow Jones industrial average, which doesn’t include Apple in its basket of 30 stocks.

Apple’s abrupt descent is fueling a debate among market-watchers. Is the stock now a bargain, as some would argue? Or, is the recent markdown in Apple’s value justified because the company has entered a phase of less innovation and slower revenue growth?

Disagreements over the issue are contributing to unusual volatility in the stock. On Wednesday, Apple’s stock fell 6.4 percent, the biggest one-day drop in more than four years. Just two-and-half weeks ago, the stock surged 7.2 percent for its biggest one-day gain in three years.

There’s no consensus regarding the cause, but one thing is clear: There have been more investors eager to sell Apple’s stock than buy it in recent months, despite all the evidence indicating Apple’s products have never been more popular.

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