Why Are Apple Inc. (AAPL) Shares Sinking?

As of this writing, shares of Apple Inc. (NASDAQ:AAPL) have fallen close to 4% in late morning trading, and did hit as low as $545 an hour and a half after the opening bell. The obvious question for investors is: why are shares of the tech giant slipping? After all, with talk of a special dividend (see Will Apple Pay a Special Dividend?), growing market share in its smartphone segment, and ongoing snippets about the iOS’s domination of online browsing (see Apple Products Make Up the ‘Bulk’ of Mobile Traffic), there have been many qualitative reasons to be bullish about Apple lately. Don’t even get us started on the stock’s bargain bin valuation either; in the mind of a pure value investor, it’s hard not to be attracted to a 9.9X forward P/E and a sub-1.0 PEG ratio.

Well, here’s one piece of negative news that may have driven shares of AAPL down, according to Reuters. Research consultancy firm IDC released its latest tablet forecast today, and it concludes that Apple Inc. (NASDAQ:AAPL) is seeing increased competition from Android in this arena. Originally reported on the LA Times, “Android-based tablets continue to gain momentum […] market share for Android tablets [is expected to] rise from 39.8% in 2011 to 42.7% in 2012. Apple is expected to see its market share for tablets decline, from 56.3% to 53.8%.” Moreover, Ryan Reith of IDC had this to say:

“The breadth and depth of Android has taken full effect on the tablet market as it has for the smartphone space […] Android tablet shipments will certainly act as the catalyst for growth in the low-cost segment in emerging markets given the platform’s low barrier to entry on manufacturing. At the same time, top-tier companies like Samsung, Lenovo, and ASUS are all launching Android tablets with comparable to premium products, but offered at much lower price points.”

While IDC did increase its aggregate forecast for the tablet market by approximately 4%, and now expects over 122 million units to be sold by the end of 2012 and 172.4 million units in 2013, Apple Inc. (NASDAQ:AAPL)’s piece of the pie is expected to continue to decline over the next half-decade.

By the end of 2016, IDC estimates that the tech giant will hold onto less than 50% of the tablet market, while Microsoft Corporation (NASDAQ:MSFT)‘s Windows platform is expected to have a 10.3% share by this time. In terms of overall growth in this arena, the firm estimates that Apple Inc. (NASDAQ:AAPL)’s iOS will have a lower CAGR (20.9%) over the next five years than both Microsoft’s Windows (69.2%) and Google’s Android (21.0%) operating systems.

Should AAPL investors be concerned over this report, or is this latest sell-off just another buying opportunity? Let us know your thoughts in the comments section below.