Apple’s (AAPL) epic fall on the markets took a symbolic turn Thursday after its market value again dropped below its top rival’s.
A more than 2% fall in Apple’s stock price to $90.28 compresses the value of Apple – once the most valuable company in the world by far – to $493.8 billion. That makes it second fiddle behind Google parent Alphabet (GOOGL) at $497.8 billion.
Shares of Apple have been in freefall this year, dropping more than 14%, amid the company’s disappointing first-quarter results. It’s the second time this year that Alphabet’s market value has surpassed Apple’s. Apple has gone from being a lift for the market to a huge anchor and it was one of the biggest pressures on the Dow Thursday. Investors have watched $276 billion in market value vanish from Apple since it peaked in early 2015.
Investors are taking a more sobering look at Apple as all signs point to the smartphone market maturing, much as the personal computer market did. Apple reported first-quarter adjusted quarterly earnings of $1.90 a share, which is well below the $2 a share expected by analysts. It’s not just a matter of just missing forecasts. Profit fell 18% from the same period a year ago. Revenue also missed expectations, falling about 12% to $50.6 billion, the biggest drop in revenue since the third-quarter of 2001, according to data from S&P Global Market Intelligence.
Apple has been under intense pressure from investors as its key product – a $650 smartphone – faces stiff competition as the market for pricey phones is now saturated and innovation has stalled. Consumers who wanted a high-end smartphone already have one and sometimes more. New features are incremental at best and that is prompting many users to keep their phones longer.
Additionally, carriers have stopped offering subsidies that help consumers pay for the phones, which is causing some to consider if the Apple product is worth the premium price. Meanwhile, in the developing world where there’s more demand growth for smartphones, Apple must now take on Asian companies making handsets that have lower price tags and are usually running Alphabet’s Android operating system. Apple has been slow to innovate and newer products like Apple Pay and Apple Music have fallen flat.
Analysts still remain steadfastly bullish on Apple shares – as they have long been – in a bet that’s worked out until the stock hit the wall in February 2015. Analysts still have an 18-month price target on the stock of $123.96.
But the bullishness is fading as the market indicates something is amiss, especially as Alphabet picks up dominance in the low-end smartphone market and Microsoft (MSFT) is focused on profitable cloud services that add functionality to any device be it one running Apple’s iOS, Alphabet’s Android of its own Windows 10. UBS analyst Steven Milunovich this week cut his price target on Apple to $115 from $120. Milunovich downgraded his profit forecast as the race to buy the latest iPhone seems to be a thing of the past. “Upgrades to the iPhone 6 have been disappointing with an apparent lengthening of the upgrade cycle due to changing carrier plans and less feature differentiation,” he wrote in a report to clients.
Follow Matt Krantz on Twitter @mattkrantz
MOST VALUABLE COMPANIES IN S&P 500
Company, Symbol, Market value ($ billions)
Alphabet, GOOGL, $497.8
Apple, AAPL, $493.8
Microsoft, MSFT, $403.3
Exxon Mobil, XOM, $370.7
Berkshire Hathaway, BRKA, $351.6
Sources: S&P Global Market Intelligence, USA TODAY
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