Why are Apple Shares Sliding?

Apple shares fell sharply Wednesday, leaving investors and traders searching for the reasons for the fall.  Shares in Apple (AAPL.O) closed down 6.43 percent, dragging down the NASDAQ index along with it.

The NASDAQ Composite index closed down 0.06 percent. The Dow Jones Industrial Average index closed up 0.64 percent, while the S&P 500 index closed up 0.16 percent on Wednesday.

Some analysts, however, are still optimistic about the stock performance of the largest U.S. company by market capitalisation.

Oracle Investment research upgraded the stock to ‘Strong Buy’ from ‘Buy’ on Wednesday on revised EPS and revenue models. Apple is a “broken stock but not a broken company, ” the research firm wrote in a note.

Algorithmic trading analyst and independent trader Paulo Santos thinks the fall is because COR Clearing  increased Apple’s margin requirements to 60% from 30% due to excessive concentration.

The margin requirement is the amount that an investor must deposit in a margin account before buying on margin or selling short, as required by the Federal Reserve Board’s Regulation. This decrease is supposedly leading to mechanical selling so that the margins can be adjusted.

Investors are also worried about the stiff competition Apple products are facing from Android devices. The International Data Corporation (IDC), a market research firm said in a report that Android’s tablet share is expected to rise to 42.7% in 2012 from 39.8% in 2011 while Apple’s share will slip to 53.8% from 56.3%.

“Windows-based tablets (including Windows 8 and Windows RT) will grab share from both iOS and Android, growing from 1% of the market in 2011 to 2.9% in 2012, on its way to 10.2% in 2016,” IDC said in its report.

Thomas H. Kee Jr., president and CEO of Stock Traders Daily, echoes this sentiment in his note for MarketWatch. He believes Apple is losing customers compared to Samsung, due to poor customer service.

“I warned that Apple was not treating its customers right, they were gouging the service providers like Verizon, Sprint and AT&T, and although that looks great to the bottom line and margins initially, it also creates a divide that can become pronounced when retail items become less favored,” Kee wrote.

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