Apple’s stock fell below $600 on Friday for the first time in three months, after the consumer electronics behemoth warned that costs of making new products will cut into profits in the holiday quarter.
Apple’s earnings for the latest quarter also missed expectations.
Apple (Nasdaq: APPL) shares were down $11.26, or 1.9 percent, to $598.28 in afternoon trading.
The company traded industry-leading margins for a revamped product line in time for the holiday shopping season, a sign of the rising costs of rivalry with Samsung Electronics Co., Microsoft Corp. and Amazon.com Inc.
The trade-off was outlined Thursday when Apple said profit in the current quarter will be about $11.75 a share on sales of $52 billion. That compares with $15.49 a share on sales of $55.1 billion predicted by analysts surveyed by Bloomberg.
Gross profit margin, the proportion of sales left after deducting production costs, will fall to about 36 percent, the lowest level in more than four years, Apple said.
Apple Chief Executive Officer Tim Cook has introduced a new iPhone and iPad, while updating the iPod and Mac computer lines. The overhaul stands to give Apple products an advantage against new phones and tablets from competing electronics makers, such as Samsung, which today reported record third-quarter profit on demand for its Galaxy smartphones. It also means rising production costs and narrower profit margins.
“They are going to have a big holiday quarter, a big March quarter, and then you have to wonder after that,” said Shaw Wu, an analyst at Sterne Agee & Leach Inc. “They could be doing this to address competition.”
Apple launched the iPhone 5 a month ago and announced two new iPads and three new Macs this week. In addition, it’s shipping new iPods.
Wall Street analysts took the adjustment in stride, knowing that Apple nearly always lowballs its estimates, but several cut their earnings estimates for the fiscal year that started this month. Stuart Jeffrey noted that Apple’s profit margins should be back to normal in the quarter that starts in April, but that will be too late to fully make up for the earnings hit in the holiday quarter. He cut his earnings estimate for the year by 10 percent and his price target on the shares from $710 to $660.
Apple shares have now lost more than $100 from their all-time peak of $705.07, hit on Sept. 21, the day the iPhone went on sale in the U.S. and eight other countries. That’s a total loss to investors of $106 billion. Apple remains the most valuable public company in the world, by a wide margin, with a total market capitalization of $556 billion.
Apple’s stock last fell below $600 following an earnings report as well. It missed expectations in the previous quarter, too, something rare for Apple.
The Cupertino, Calif., company started taking orders for the iPad Mini on Friday. The new, smaller version of the iPad tablet starts at $329. Initial shipments of the white model quickly sold out on Apple’s site; buyers will now have to wait two weeks for delivery. The black model was still available Friday afternoon for a one-week delivery.
(Bloomberg and The AP contributed to this report.)
