Apple 2.0

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Munster: 4 more reasons Apple got clobbered Wednesday

December 5, 2012: 2:59 PM ET

Piper Jaffray's chief Apple enthusiast comes to the defense of the embattled stock

chart_ws_stock_appleinc_201212517129_galleryvFORTUNE -- With Apple's (AAPL) shares off more than 6% Wednesday, there was no shortage of theories about what was driving all the selling. We highlighted one -- Apple's failure to issue a special dividend -- earlier today. In a note to clients a few hours later, Piper Jaffray's Gene Munster addressed four more:

  • Digitimes Article Appears To Be Misinterpreted. A Digitimes article from today suggests that iPhone 5 is selling well based on comments from wireless chipset providers and seems to suggest upside to the Street's 43-45 million estimate for December. In the same article, Digitimes is suggesting a 20% q/q decline in Apple's demand for parts and components in March. We believe this 20% decline is to be expected coming off of a launch quarter and do not believe it is an indication of how units might trend in March. As an example, if Apple ordered 52 million iPhones from the channel in December and 48 million are sold, that implies a 4 million unit channel fill and 41.5 million units ordered from Apple in March. That would mean 44.5 million units would be available for sale in March, which would mean our 43 million iPhone estimate for March is well within the range of probability.
  • Technicals Suggest Downside Largely Priced In. Apple's simple 50 day moving average is nearing its 200 day moving average, which is a negative technical sign. Based on our conversation with Piper Jaffray Technical Analyst Craig Johnson, we believe that for this technical indication, most of the damage has been done to AAPL, but there could be a worst case additional 10% move to the downside which could be the next meaningful area of support.
  • Margin Requirements Being Raised. We also note that CNBC is reporting that COR Clearing is raising margin requirements on Apple from 30% to 60%. While we don't know what percentage of AAPL shares are on bought on margin, we do not believe the requirement change has anything to do with the fundamental health of AAPL.
  • China Mobile to Carry Nokia Lumia. Nokia reported today that it would launch its Lumia handset on China Mobile by the end of the year. We believe some investors have speculated that China Mobile will carry the Lumia instead of the iPhone. We do not believe this is true and note that China Mobile already carries multiple smartphones from multiple vendors. We continue to expect China Mobile to add the iPhone in the back half of 2013.

Apple closed Wednesday at $538.79. Munster is sticking with his price target of $900 a share.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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