Is It Time To Start Worrying About Apple?

Cecil is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The apple of many investors’ eyes (pun intended) has started to falter of late. Apple (NASDAQ: AAPL) shares are off another 4 percent today, and the company has lost a fifth of its market value since shares peaked in mid-September. 

So is this a worrisome sign for Apple investors? Let’s take a look and find out.

The Phone Wars

I have mentioned earlier the study from IDC claiming that Android-based smartphones dominated market share in the third quarter. Android-based phones released by Google (NASDAQ: GOOG) are Apple’s biggest challengers in this space, and will remain so. With its foray into manufacturing smartphones as well, thanks to the Motorola acquisition, expect Google to fight harder on this front. The company’s Nexus 4 went on sale in the UK again recently and sold out within an hour. So clearly there is a supply problem, or consumers are in love with the phone. I’m inclined to go with the latter. The phone has a quad-core processor and a 4.7” screen.

Nokia (NYSE: NOK) is also a potential threat with its first real competitive product in the space – the Lumia 920. China Mobile agreed to carry the Lumia 920T, the companies said in a recent statement. While Apple has agreements with China Telecom and China Unicom (Hong Kong) to sell iPhones, the California-based company hasn’t yet forged a deal with the country’s largest wireless carrier in the world’s largest mobile-phone market.

The product is already sold out in the US. AT&T CEO Ralph de la Vega told investors that the company sold over 6 million smartphones through 2 months in Q4. The iPhone accounted for 77% of AT&T's Q3 smartphone sales, but de la Vega also mentioned that the emergence of the Lumia 920 has provided a nice push.

Nokia has also spoken of plans to release the Lumia 620, the successor to the Lumia 610. This will be a phone for a cost-aware consumer.

While Apple was a dominant player in the market, they haven’t ever been a stand out performer in this space, and that is most likely going to continue

The Tablet Wars

Apple got hit with some bad news on the tablet front as well. Research firm IDC said in a report today that Apple’s share of the tablet market will slip to 53.8% this year from 56.3% in 2011, while Google’s portion will advance to 42.7% from 39.8%. Apple’s market share will drop to below 50% by 2016, but global tablet sales will more than double in the coming four years.

While the percentage drop doesn’t seem particularly large, in actual numbers it probably will be. And the fact that the company’s market share is getting chipped away isn’t going to bode well for profits. Speaking of results, the company missed estimates for the past two quarters. Another earnings miss won’t exactly be good news for the company.  

Technicals aren’t great

Some analysts are saying that Apple is heading for the death cross. The "death cross" is when a shorter duration SMA and a longer term SMA both point lower, with the shorter one crossing below the longer one. Apple are showing signs of that, something that hasn’t happened since 2008.

Having said that, the company is one of few that sees intense demands for its products. This is because there is a certain quality to every Apple product. You know you aren’t going to make a mistake, even if you pay a slight premium. The company has a lot of projects under development, including one similar to Google’s Goggles idea. And while I mentioned that it is ceding market share in tablets and smartphones, it is still a fairly large player in both these sectors. And also don’t forget their strong presence in the personal computing space with Macbooks. All in all, I don’t think I am too worried, but I would be if the price got closer to $500.

ceciljohn2002 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services recommend 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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