On Friday, Apple Inc. (NASDAQ:AAPL) investors continued their dose of reality as the stock’s price was nearing its eight consecutive week of declines while the clock ticks closer to potentially increased capital gains taxes early next year.
With the stock trading at $528 just prior to the day’s close on Friday, it’s a far cry from its record September-high of $705.07.
Apple Inc. (NASDAQ:AAPL)’s stock has lost 25 percent of its value since then and its drop has outpaced stocks from the S&P 500, which fell slightly under 7 percent during the same time period, reported Reuters.
In addition, the company’s market capitalization has taken a $170 billion hit; this equates to slightly more than Coca-Cola’s (NYSE:KO) entire value.
Apple Inc. (NASDAQ:AAPL) currently has a $493 billion value, which comes in $100 billion higher than the No. 2 most valuable U.S. company, Exxon Mobil Corporation (NYSE:XOM).
Thanks to the possible “fiscal cliff” capital gains and dividends taxes could rise in 2013 as a result of the deficit-cutting deal. If investors still their Apple Inc. (NASDAQ:AAPL) stock now, they can grab their gains against next year’s potentially increased taxes; however, with the talks in Washington, investors are not buying the falling Apple shares.
Currently, the tax rate is a 15 percent on dividends and capital gains but they are set to expire at year’s end. These items will then be taxed as ordinary income; highest earners could see 35 percent rates.
Bucky Hellwig, senior vice president at BB&T Wealth Management said to Reuters, “Some of the selling is being driven by these tax decisions, but the flip side is there is not a lot of buyers because the buyers are procrastinating to see how the negotiations come out. You probably have an inordinate effect to the downside because of these tax strategies.”
Even with the recent dive, year to-date, Apple Inc. (NASDAQ:AAPL) shares are up 30.3 percent. Each year since 2003 sans 2008, the stock’s price has risen.
Erik Davidson, deputy chief investment officer for Wells Fargo Private Bank said to Reuters, “If you’ve got all these gains – which a lot of Apple investors have because it’s done very, very well – then you’re going to see selling in the likes of Apple and other companies that have had good runs.”
For more than a month, Apple Inc. (NASDAQ:AAPL)’s stock has traded beneath its 14-day and 50-day moving average which could mean its short- and mid-term momentum is negative, noted Reuters.
But even with the drop, Thomson Reuters StarMine has estimated Apple’s intrinsic value is about $833.90 a share. This number comes from analysts’ growth estimates for the next five years and StarMine’s expected growth rates for the following years.
The stock is likely worth greater than its current price and tax concerns should be factored into this noted Phil Orlando, chief equity market strategist at Federated Investors to Reuters.
He added, “I think the stock is worth $750. If you are sitting here looking at Apple trading at $500, you say, ‘Well the stock ought to be 50 percent higher over the course of the next year or two,’ so the stock looks pretty attractive.”
Apple Inc. (NASDAQ:AAPL)’s stock closed down 3.54 percent for the week.
