Matt Krantz, USA TODAY
Lines may be forming for Apple's latest gadget, but investors couldn't run away fast enough Wednesday.
Following news of the latest security attack of Apple's iCloud service over the weekend and news of a smartphone partnership between Samsung andFacebook (FB), Apple's AAPL shares were under major pressure.
Shares of Apple Wednesday fell $4.36, or 4.2%, to $98.94. That's the biggest dollar decline by Apple since it lost $6.19, or 8%, to $71.17 on a split-adjusted basis on Jan. 28, 2014, according to data from Yahoo Finance. Since Apple is the most valuable U.S. company, with a market value of more than $618 billion, Wednesday's decline cost investors $26.1 billion.
Major U.S. markets were mixed in midday trading Wednesday with Apple (AAPL) pushing the Nasdaq lower. Stocks had opened positive on the possibility of a cease-fire between Ukraine and Russia. Newslook
To put the day's decline in perspective, the market value lost in Apple in one day exceeds the entire value of more than half the companies in the Standard & Poor's 500. For instance, the entire company Marriott International (MAR) is valued at $20.2 billion.
Apple's decline even pushed the entire broad Standard & Poor's 500 into the red. The decline in Apple stock shaved 2.97 points off the S&P 500. Had Apple been unchanged, the S&P 500 would have been up 1.41 points. Instead, the S&P 500 fell 1.56 points to 2000.72.
Investors are worried about Apple's continued slide behind rivals pushing in new technology. The latest iPhone is expected to add a larger screen and wireless payment technology, features that have long been offered by Samsung's Galaxy and Microsoft's (MSFT) Lumia lines. Apple plans to meet with the press on Sept. 9 to announce the latest updated model of its smartphone.
"Stocks can trade with increased volatility around events and there is a big event expected for next Tuesday," says Walter Piecyk, analyst at BTIG.
'LITTLE ROOM FOR ERROR'
Meanwhile, on Wednesday Facebook's virtual reality unit, Oculus, said it plans to add its technology to select Samsung gadgets. The companies are developing a device called Gear VR, which is a virtual reality helmet that works with Samsung's Galaxy Note 4 smartphone. Investors see virtual reality as a way for tech companies to breathe new life in the increasingly mature and saturated smartphone market.
"We think Apple has little room for error in delivering on a spectacular iPhone 6 launch," says Brian Colello, analyst at Morningstar. "The Samsung Galaxy Note Edge announced today appears to be an interesting device with its innovative side screen and may provide Apple with stiffer competition in the very large screen (5.5″) portion of the smartphone market than what many have anticipated."
CELEBRITY PHOTOS
Reports over the weekend about hackers gaining access to private photos stored on some celebrities' smartphones and the associated Apple online service called, iCloud. The security question calls into debate Apple's skill at the increasingly important ability to store mobile data on remote servers, or "the cloud."
"Concerns over iCloud have hit at the worst possible time for Apple – a highly publicized flow that's making the news a week before a major launch," Colello says. Apple had "touted" its security over competing models from Samsung and is expected to unveil payment systems. The security issues about iCloud cause pause.
The sudden decline in the shares interrupts what had been a powerful rally in 2014 as investors anticipate new devices including an upgraded phone and perhaps a watch-like gadget. Shares of Apple are up 23% this year and set an all-time, closing split-adjusted high of $103.30 on Tuesday.
It's the latest reminder of the dangers to individual investors who pile into stocks that are universally loved. Even good companies can get overvalued. The selloff comes after the company hit $100 a share, which was the stock's latest peak the last time the stock fell apart.
"Apple (stock) has had an tremendous run over the past few months, still up 32% over the past six months and reaching all-time highs," Colello says. "So we think it's reasonable that investors might be taking profits."
Professional investors had been warning the stock's upside would be limited to about $100 a share over the next 18 months. Since then, analysts have increased their average 18-month price target on the stock to $106, but still, that's just 6.2% higher than the current stock price.
Some investors might think such small potential upside isn't worth the risk of a stock that relies so much on the sales of one product, the iPhone, no matter how long the lines might be.
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