Apple down? RIM up? It's like investors have entered a smartphone bizarro world.
Following an unconfirmed report of waning iPhone 5 sales, nervous investors briefly drove Apple's stock below $500 on Monday, continuing a slide from a peak of more than $700 in September.
Kicking sand in Apple's face, chief rival Samsung announced Monday it has sold 100 million Galaxy S smartphones. And even the stock of struggling Research in Motion, whose sales of BlackBerrys were crushed by the iPhone in recent years, soared 10% amid optimism that Apple's weakness might help it rebound.
Whether these Apple fears are unfounded remains to be seen. But the gathering doubts about Apple's business have dramatically raised the stakes for its earnings report scheduled for Jan. 23, an event that already was expected to be intensely scrutinized.
If Apple wildly exceeds expectations, as it did last year, and executives offer a rosy outlook, investors hope the stock will repeat the remarkable run that peaked in September. But should earnings disappoint, or executives reduce their sales projections for the coming quarter, there's no telling how far a stock that's already down 28.5% in the last three months could plummet.
Such a plunge could heighten doubts about Chief Executive Tim Cook's ability to lead Apple as effectively as co-founder Steve Jobs, who stepped down in August 2011 and died several weeks later.
"There's this lingering unease about the stock because Steve is no longer around," said Charles Wolf, an analyst at Needham & Co. "The problems last quarter have raised the issue in investors' minds that Apple no longer has a leader of Steve's stature."
Apple's stock closed Monday at $501.75, down $18.55, or 3.57%.
In general, analysts seem confident Apple will meet or beat expectations for the quarter that ended in December. They are focused on the company's outlook for the rest of the year. Will Apple raise or lower its sales and profit forecasts, or even keep them the same?
"If the company gets on the call and provides a positive outlook to sales, then investors will be relieved," said Walter Piecyk, a research analyst at BTIG. "But any reduction in earnings guidance could scare people."
Clearly, investors remain spooked. Sunday night, the Wall Street Journal, citing anonymous sources, reported that Apple had slashed orders for several components for the iPhone 5. Investors interpreted the move as a signal that the latest phone, which was plagued by supply chain issues and shipping delays, was not performing as strongly as previous versions.
Apple did not respond to a request for comment.
Like many Apple rumors and stories, however, this latest development was open to different interpretations. Many analysts and independent observers suggested indications that Apple had cut its outlook for the iPhone 5 by as much as half seemed extreme, given recent reports of strong smartphone sales by Verizon Wireless and AT&T.
Wolf, the Needham analyst, suggested an alternative explanation to reports that Apple needed fewer screens. Because the iPhone 5 had a longer screen than prior versions, he said, suppliers at first had a hard time manufacturing them, so Apple had to over-order screens because the rates, or "yields," of acceptable screens out of each batch was low. It's possible manufacturers have become more efficient, producing fewer duds and allowing Apple to reduce its orders for screens.
Still, nobody will know the answer until Apple reports its first-quarter earnings. And until then, investors' nerves will probably remain frayed after watching the stock fall from its peak of $702.10 in September.
The issues weighing on Apple's stock are many and complex. They include fears that Apple is losing too much market share; that its profitability will slip as it makes cheaper iPads, or a rumored cheaper iPhone; that consumer interest in new versions of products doesn't last as long; and that dramas like the Apple Maps issue and the management shake-up last fall are signs that Cook doesn't have the vision to lead the company as effectively as Jobs.
Those doubts have been gathering steam since last summer. In July, the consensus among analysts was that Apple would report earnings per share of $54.87 for the fiscal year ending September 2013, according to Bloomberg. As of Monday, that figure stood at $48.86.
That would put Apple's earnings-per-share growth at 10% for the current year, compared with 80% two years ago, and 60% in the 2012 fiscal year that ended in September. Even more remarkable and worrisome, Piecyk said, is that some analysts believe there is a chance Apple's current quarter, which runs through March, could see the first decline in year-over-year quarterly earnings per share in a decade.
"If these growth rates continue to go down, it's going to be hard for the stock to work," Piecyk said.
Of course, plenty of analysts and investors remain bullish on the stock, with some projecting it will climb past $1,000 per share this year. They argue the recent stock slide has been due to technical reasons; that the stock is cheap by historical measures; and that rumored products like an Apple TV could propel the company to greater heights.
Everyone is hoping that when Apple lays its cards on the table Jan. 23, investors will know which narrative is correct.
"I think there's a real malaise that has taken over the story of Apple," Wolf said. "We'll see if it goes beyond the 23rd."