The Case for Apple's Stock Price Falling to $270

Apple has been slumping. In September, the stock hit an all-time high of $705. On Monday morning, it briefly traded below $500 in pre-market trading. (As of 11 a.m. ET, it was back up around $507.) At least one analyst predicts it has much further to fall. Since January, Edward Zabitsky of Toronto-based ACI Research has been arguing that Apple (AAPL) is headed to $270 a share. He now sees the stock reaching that level in 12 months. Zabitsky, who is ranked as analyst tracker StarMine’s top semiconductor and semi-equipment stockpicker, says his bear case for Apple comes down to increased competition; the diminishing appeal of its closed-architecture App Store experience; and questions about management and Apple’s ability to innovate more than a year after the death of founder Steve Jobs.

Here’s his case against Apple.

Competition from Microsoft
Microsoft (MSFT) continues to execute on its efforts to regain relevance with consumers and maintain its dominance of the corporate market. Core properties Office, Skype/Lync, Xbox, and Skydrive are becoming available across multiple platforms. Microsoft’s strategy is to extend its dominance in enterprise, desktop, and notebook computing to tablets and phones.

Competition from Samsung
Samsung (005930) is the smartphone leader. The Galaxy S II and Galaxy Nexus allowed Samsung to gain market share from other Android vendors. Now the Galaxy S III and Galaxy Note II are threatening Apple’s dominance of the high end. Samsung has sold more than 30 million GS3s and 5 million G-Note 2s. Those phones are leading the way to larger displays for video consumption. The G-Note’s multi-window interface is probably Samsung’s greatest UI enhancement to date. The GS3 is a serious challenger to the iPhone.

Web Apps vs. the App Store
The rollout of 4G networks is vastly expanding bandwidth, while advances in Web standards are allowing Facebook (FB), Amazon (AMZN), Netflix (NFLX), and YouTube to take control of their presence on phones. They are using Web apps to avoid the App Store, and consumers are noticing. That iPhone 5 customers unhappy with Apple Maps are easily able to switch back to Google Maps (GOOG) shows that Apple’s grip on the consumer—and its ability to extract high profit margins—is weakening.

Leadership
Management discord in Cupertino, as illustrated by the recent ouster of Scott Forstall, the head of Apple’s iOS software group, is another cause for concern. Apple, Zabitsky argues, must “develop a more unified approach between its Mac and iOS groups. More than a great innovator, Steve Jobs was a unifying force who was able to challenge people to bring their best game.” He says he doesn’t believe the Apple Maps fiasco would have happened under the late founder.

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