The Dividend Daily

Apple Inc(AAPL), which used to be on top, has lost a whopping 25% of its market cap since mid-September, and there are a number of factors suggesting that stock will continue to fall. How much further can the tech behemoth fall before it hits rock bottom?

Technicals Not Looking Good

Just roughly two months ago, Apple was seeing its stock at an all-time high, reaching over $705. Since then, the stock has declined by 25% following the release of the iPhone 5, to about $525 on Nov. 16. The stock just passed through the $530 technical level on Wednesday, and it continues to fall even further. With the next level of support declining to $420, many investors believe that the stock could actually plummet to $420, or even lower. However, the psychological round number of $500 could attract buyers, should it hit that point.

And despite such a significant decline, APPL is still up 25% year-to-date, outpacing the S&P by fifteen percentage points.

This fall has surprised many investors; a stock that just recently reached all-time highs is now rapidly falling, with no major news events to point to for the decline. The recent plunge has even pushed the company’s dividend yield to over 2%, up from the mid-1% level it was at just last month (dividend yield moves inversely in relation to price).

Some Big Shots are Trimming Positions

Technicals are not the only clue for investors about where AAPL is going. Famous hedge fund manager David Einhorn recently cut 25% of his stake in the company, going from 1,454,520 shares to 1,090,890 shares.

Additionally, it was reported that last Thursday that two Apple insiders sold a significant portion of their shares. Apple’s general counsel, Bruce Sewell sold 2,438 shares of Apple which were priced around $549. He then sold another 2,700 shares priced at $550. In total, Sewell sold $2.8 million worth of Apple shares this week. Earlier this month, Sewell made another sell of 5,137 shares, totaling $3 million.

Board member Arthur Levinson also made a large transaction on Thursday, selling 7,500 shares at $560.65, totaling $4.2 million.

Other Factors to Consider

If weak technicals and insider selling is not enough to make investors cautious, there a few other factors which are signs of decline in the stock.

Recent reports indicate that the iPhone 5 will not be released in China anytime soon. Apple and China Mobile were unable to make a deal regarding the phone, which had originally been slated for an early 2013 release in Chinese markets. Analysts do not believe that this is was technical issue, but an issue with the carrier’s data network.

The lack of supply for the iPhone 5 has also been a concern for investors. Since the September release of the phone, Apple’s manufacturers have been unable to meet demands. Although demand has slowed down slightly, making it a little easier for Apple to catch up with manufacturing there may not be enough phones to meet the holiday season demand, which is a huge and essential revenue booster.

Sure, there are plenty of Apple investors that are holding on to the stock, waiting a little longer to see what happens, but that does not mean that there are not a bunch of people out there still planning on selling. There has also been a significant increase in short interest for APPL, which is a definite sign that a growing number of traders believe that the stock has more downside ahead of it.

The Bottom Line

Only time will tell how low AAPL will go. Several factors are not aligned in its favor however. From a technical standpoint, things don’t look good. Many investors are selling the stock to protect their remaining gains, if any. Although many other investors remain optimistic about the stock, the factors mentioned above definitely show that they are reasons to remain cautious with Apple.

Apple Inc(AAPL) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.