Thursday, November 8, 2012

Apple Inc. (NASDAQ:AAPL) shares tank on tax fears

Apple Inc.(NASDAQ:AAPL) shares slid southwards on Wednesday and again in today’s session, the day when President Barack Obama was re-elected for a second term with a convincing majority.

Apple shares were down nearly 4 percent, falling more than the broader market which were worried about the `fiscal cliff' in the U.S. economy. This morning the stock opened slightly higher, but now down 2% to $ 547.97.

In Apple's case the worry was about how the presidential election will impact tax rates and consumer demand for Apple's products.

Apple products have generally been resistant to prices in the sense that people have bought its smartphones and tablets even if they have been highly priced compared to other similar devices.

However during his campaign Obama had said that he intended to raise capital gains tax rate to 20 percent for those whose annual income was above 250,000, up from the current rate of 15 percent.

Analysts are speculating that this may be a reason for the sell-off in the stock as investors would be anticaking being taxed at a higher rate if they held on now and sold later.

The New York Times, which analysed the issue said - Owners of Apple shares would have good reason to fear higher taxes on capital gains. Apple shares have appreciated mightily since 2005 when they were about $35 apiece; they began this year at $411 and peaked at more than $700 in late September. The drop on Wednesday only added to what has been a grim few weeks for Apple shares, which have fallen over 20 percent from that peak, to $558 on Wednesday.

There is already some concern in the market about how much growth the company can sustain and whether it would run out of people to sell products to.

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