Apple's shares have fallen more than 20 per cent from their September peak, the stock's biggest correction since the share market crisis in late 2008, underlining a change in investor sentiment around the world's most valuable company.
Since the launch of the iPhone 5, investors have expressed concerns about Apple's ability to manufacture enough new products to meet customer demand, recent management changes and slower earnings growth.
Yet as Wall Street sentiment has turned more bearish, many of Apple's supporters in the technology industry have championed the iPad mini as its best new product in years. That marks a reversal of September's dichotomy, when investors' enthusiasm about the iPhone 5 stood in contrast to concern in Silicon Valley that the smartphone was merely an incremental improvement over past models.
Wednesday's decline of 3.8 per cent saw Apple close at $558, a five-month low. The stock now trades at 21 per cent below September's all-time high of $705.07 and has lost $138bn in market value since then.
Still the world's most valuable company, Apple's weighting in the S&P is now 4.2 per cent, down from 4.8 per cent. Yet the stock is becoming more volatile, suffering a 16 per cent sell-off over several weeks in the spring.
While Apple's share price has appreciated more than 400 per cent in the past four years and 38 per cent in the year to date, its current decline is Apple's largest since it lost more than half its value in the financial crisis of autumn 2008.
Wall Street has been spooked by warnings from Foxconn, which manufactures the iPhone and other Apple devices, that it is struggling to meet the company's quality requirements.
"It's not easy to make the iPhones. We are falling short of meeting the huge demand," Foxconn chairman Terry Gou said on Wednesday, according to Reuters. Apple has also said it is struggling to make enough iPad minis, almost selling out in its first weekend.
"Similar to the iPhone 5 launch in September, we believe Apple is facing significant constraints for the iPad mini," Barclays analysts said in a recent note to clients, while adding that they believe there is still "considerable demand" for the tablet.
Apple now trades at 9.2 times Barclays' 2014 earnings forecast of $60.66, below its average forward multiple of 12.1 times, as of September.
BTIG Research's Walter Piecyk notes that after earnings growth of 60 per cent and 83 per cent in the last two years, the projected 13 per cent rise for the current year is relatively sedate.
"How can you argue for [price-to-earnings] multiple expansion when the earnings growth is slowing and competitive risk is increasing?" Mr Piecyk said.
Apple sentiment has also been affected by a pair of patent litigation setbacks this week. After its licensing dispute with Google's Motorola Mobility was dismissed by a judge in Wisconsin on Monday, a jury in Texas awarded $368m in damages against Apple over its alleged infringement of networking patents belonging to VirnetX with FaceTime.
Investors are also considering the effect of chief executive Tim Cook's sudden staff changes last month, including the departure of the group's software and retail chief, at a time when Google and Microsoft are seen as making significant improvements to the design of their mobile operating systems.
Another concern affecting Apple and other US-based multinationals on Wednesday was that Barack Obama could increase try to raise taxes on overseas earnings in his second term.
However, Jack Ablin at Harris Private Bank said that technology firms could fare better than financials or healthcare under the Obama administration.
"The [tech] sector is probably best positioned among all groups under Obama because there is little public pressure for regulation and its dividend yield tends to be lower than average, mitigating the adverse consequences of a change in the tax code," Mr Ablin said.