Apple (Nasdaq: AAPL) fell 5 percent on Wednesday and Thursday, and some analysts are concerned that the technology stock won’t stop there.

Apple is currently trading at $385 a share, down from $406 late Tuesday and $422 on October 18. One analyst, Scott Redler of the online trading firm T3live.com, said Apple could fall all the way to $362 – a level the tech stock hasn’t seen since late August.

But why? Why is Apple stock in full retreat mode when its iPhone 4S just set a pre-order sales record and is due to hit 15 new markets today alone? There are several reasons.

  • Apple reported below-forecast quarterly earnings for the first time ever on October 18, and its stock has yet to fully recover.
  • There have been reports of production cuts among the company’s iPhones and iPads, perhaps due to component shortages in its Thailand plant due to the massive flooding in that country.
  • Expected competition for the iPad from Amazon’s (Nasdaq: AMZN) Kindle Fire and Barnes & Noble’s (NYSE: BKS) Nook Tablet. Both electronic tablets hit the market next week.

Those factors have been enough to create some rare worries among investors about Apple’s future stock prospects. Jim Cramer of MSNBC’s “Mad Money” says he’s starting to “agonize” over Apple because of the new tablet competition and the uncertainty surrounding the company’s leadership since the death of its brilliant founder Steve Jobs.  Clearly other investors share Cramer’s concerns.

But are those concerns really enough to send one of the bluest of blue chip stocks into a full-on tailspin? There are reasons to believe otherwise.

For one, the lower-than-expected earnings report, as I wrote last month, was largely attributable to people holding off on buying an iPhone until the 4S was released in early October – the beginning of a new quarter. Given that the 4S is expected to have record sales this holiday season we should expect healthier earnings in the December quarter.

The “reports” of Apple’s production cuts are more speculation and rumor than based on actual fact. Susquehanna chip analyst Chris Caso, who has researched the iPhone production matter extensively, told MarketWatch that he “doesn’t have enough information to make that determination at the moment.”

As for the iPad getting some new competition in the coming months, both the Kindle Fire and Nook Tablet are lower-end products with fewer features than the iPad. Their cheaper price tags – the Fire is $199 and the Nook $249, compared to $499 for the iPad 2 – have created fears that they’ll steal some business away from the iPad. But it’s more likely that the two new products will be competing against each other, not the iPad, since the iPad targets a completely different (read: wealthier) type of tablet buyer.    

So while the Chicken Littles on Apple are out in full force at the moment, there are reasons to believe that the last two days are the result of a fear-driven market overreaction than evidence of a sustained downturn for one of the premier tech stocks on the market.

Published by Wyatt Investment Research at