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Analysts Worry About Apple (NASDAQ: AAPL) 'Market Correction'

 April 20, 2012 10:49 AM

(By  Fred Dunsel) Last Friday, Apple (NASDAQ:AAPL) closed at $605.23, continuing a downward trend for the week. The stock fell by 4.5% in the course of last week. After peaking around $643 in early April, Apple has been falling ever since. While the stock is up 49.4% for the year, some are now wondering if Apple has peaked for now. The impression was further reinforced when Apple fell again on Monday this week by 4.15%, marking five consecutive days of decline.

Amid worries that the demand for iPhones and iPads might have been overestimated, analysts wonder if Apple is now due for a "market correction". There is also growing concern that mobile-phone carriers will cut subsidies for the iPhone, eroding profitability of one of Apple's best-selling products. Last week, Verizon Wireless announced that it would start charging $30 for an upgrade to a new phone, a move that was widely believed to be part of measures to keep iPhone sales from eating into profit margins.

[Related -Apple Inc. (AAPL): How Q1 Earnings Will Fare?]

Given the above, analysts and investors are now adopting a more critical look at Apple. Walter Piecyk, an analyst at New York-based BTIG LLC, downgraded his rating for Apple from "buy" to "neutral", noting that "operators are trying to fight back against the impact that Apple is having on their business." In addition, Wedge Partners analysts wrote, in their research note, that demand for the latest version of the iPad has begun to wane, adding sales figures could be below expectations in Apple's earnings report due on 24 April. Carter Braxton Worth, a technical analyst at Oppenheimer & Co, wrote that the stock slide could persist in the coming days.

[Related -Apple Inc. (AAPL): iPhone Trending into Another Carl Icahn Disappointment?]

While the company's fundamentals remain strong, many are now questioning if its stock has been overvalued. After all, the stock is up nearly sixfold since March 2009. Nonetheless, whether it is a short-term blip or the start of a longer-term term trend, it is also possible that investors are now taking in profits before the earnings announcement next week. "It's had a huge run," said Burt White, chief investment officer of LPL Financial in Boston. "Some investors probably said, ‘Might as well take some profits.'"



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