Apple shares fall amid concerns that carriers may cut iPhone subsidies

Apple's (NASDAQ:AAPL) stock dropped for a fifth straight trading day on Monday, down to almost 10 percent below its April 10 peak of $644 per share, amid concerns that wireless carriers may cut the subsidy they pay to Apple to sell the iPhone.

The concerns might be only part of why Apple's shares have fallen recently, as many financial analysts think the recent drop could merely be a market correction for a stock that has risen dramatically over the past few months. On Monday, Apple's shares fell by $25.10, to $580.13 per share, in Nasdaq Stock Market composite trading. Before Monday, Apple's shares had risen 49 percent so far this year, making Apple by far the most valuable company in the world by market capitalization.

"Operators are trying to fight back against the impact that Apple is having on their business," BTIG analyst Walter Piecyk, who last week cut his rating on Apple to neutral from buy, said in an interview Monday on Bloomberg TV's "InBusiness With Margaret Brennan."

In his research note last week, Piecyk noted that carrier subsidies have fueled the iPhone's growth, even in areas like Europe and China where the prepaid market is more dominant. In return, carriers received a boost to their average revenue per user.

"The positive inflection point in ARPU was cheered by investors but the cost to drive that ARPU accretion is now starting to eat away at profitability and the performance of those stocks," he wrote. "Operators, unwilling to stall the pace of ARPU growth, offered generous upgrade policies including some that enabled a fully subsidized phone upgrade only one year in to a two year contract. We expect those policies to change as the faster upgrade rate of smartphones compared to legacy feature phones has been a costly surprise to postpaid and prepaid operators, alike."

While Apple declined to comment on the stock swoon, according to the Wall Street Journal, many investors and analysts are concerned that the drop could mark the beginning of a larger decline for Apple. "A lot of people are starting to ask very legitimate questions about Apple," Michael Farr, president of portfolio-management firm Farr, Miller & Washington, told the Journal. "It's a very fine company, but they haven't had many pullbacks."

Others are less worried. "Is Apple best name in tech? Yes," Wedge Partners wrote in a report to clients, according to Bloomberg. "Have we seen the stock price plummet in the past, when expectations were out of whack with results? Yes. In our view, there is some risk to this happening again in the March quarter, and the result would likely be the stock coming back down to earth."

For more:
- see this Bloomberg article
- see this WSJ article (sub. req.)

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