The watch can't save Apple, either

Strong initial sales of the new iPhone can't save Apple's stock from suffering. But it appears the watch isn't the shiny silver bullet either.

Shares of Apple are down $1.94, or 1.8%, to $108.19 Thursday continuing the digital gadget maker's ongoing beat-down. Shares of the formerly can-do-no-wrong stock are down 19.6% from their high - putting them just outside the claws of a bear market. That's much worse than the 10.7% decline of the broad Standard & Poor's 500 from its high. Apple's stock is now down 2% for the year.

The fact Apple is falling even faster than the market is a surprise to some - who thought strong initial sales of a new smartphone was a catalyst. But now, there's a growing realization the watch isn't the killer new product category the bulls were hoping for, either.

The sell-off in Apple shares has stunned the Apple bulls, who thought the only way to lose money on the stock is to not own it. Investors figured the strong "record" initial sales of the latest iPhone last Friday would get the stock going. But just the opposite has happened - shares of Apple have dropped 5.9% since the product first went on sale last week - while the S&P 500 is down 1.5% during that time.

Given the massive size of Apple - it's the most valuable stock in the U.S. - its pain felt by the entire broad market. The decline in Apple is a major reason why the Nasdaq composite index has tumbled 12.5% from its 52-week high. Not even bullish comments by investor Carl Icahn about the stock Wednesday - which is usually good for a pop - can get it going.

Investors are realizing that Apple gets most of its profit from a product category - smartphones - that's increasingly mature. Just about everyone who wants a smartphone has one - or two. That means it's largely a replacement market.

But what about the watch? Investors keep hoping the company can continue to lure consumers to bring their wallets with new products - but none have had the same magic as the iPhone. Not Apple Pay. Not even the watch. "Apple watch unlike to move the needle soon," is the title of a research report from one of the few analysts to accurately call Apple stock's struggles, Abhey Lamba of Mizuho Securities. Surveys of consumers found that while Apple has strong "mindshare" with potential smartwatch buyers, most are "likely to wait for the next generation to purchase," Lamba says in a report to clients.

The price of the Apple Watch, too, needs to fall before "watch adoption" will increase, Lamba says, which is a problem for the stock since the Apple story has been one of driving prices higher as component costs fall. Apple's brand - in smartphones - has allowed the company to hold the line at $650 for handsets even as prices on rival phones have fallen.

If there's a bright side, it's eventually once the over bullish sentiment is flushed out, the stock might finally be attractively priced. While being accurately cautious on Apple - Lamba still has a price target of $125 on the stock. That's well below the $147 average analyst price target - but still significantly higher.