By Khurram Aziz | Nov 09, 2012 09:50 AM EST
Shares for Apple entered bear territory on Wednesday, after falling 21% from their record high in September. If one analyst is to be believed, it will continue to plunge to $425 as the company struggles to maintain its legacy of innovation.
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Jeff Gundlach, the chief executive of DoubleLine Capital told CNBC on its Fast Money: Half Time Report, "The product innovator, as I've said over and over again, isn't there anymore."
Gundlach, who recommended betting against Apple in May, said the stock is "overbelieved" and he criticized its latest iPad Mini device.
"I'm really struck by this mini iPad thing, as if that's any kind of a product innovation," he said. "Once you start just changing the size of your products, I really think you're not exactly innovating. I'm wondering if you're going to start coming out with the tutti-frutti iPad, where it comes out in different colors."
Under visionary chief executive Steve Jobs, Apple became the biggest company in the world. Its products, such as the iPod, iPhone and iPad, have been credited with revolutionising the consumer electronics industry. However, competition from the likes of Samsung and HTC, have continued to eat into sales.
Samsung is today the world's biggest smartphone manufacturer with its Galaxy handsets now outselling the iPhone, according to a report from Strategy Analytics.
The two companies are in litigation in courts around the world with Apple accusing Samsung of copying the designs of its devices. In August, a US court awarded Apple $1.05bn against Samsung for patent infringement. That case is currently in appeal.
However, it's not all bad news for Apple. Its iPhone 5 device reportedly sold five million units in its launch weekend and sent its share price to a record high of $705.
But there are already problems at the iPhone manufacturing facilities run by Foxconn in China, which is adding to investor uncertainty. In recent comments, Foxconn chairman Terry Gou said the company was struggling to keep up with demand, raising fears that Apple may struggle to ship its device to consumers.
There are other issues Apple is facing too, which could be affecting its stock price. The re-election of President Obama in the US has led to speculation that taxes on capital gains may increase next year.
"If you're going to think about higher tax rates, maybe you want to sell the stocks before the tax rates go up, and I think that may be pressuring stocks in general," Gundlach said.
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