Apple Shares Slump on Downgrades

Andrew Klips |

Shares of Apple Inc. (AAPL) have been steadily trekking upward since the beginning of July when the stock slipped below $400 per share for the second time in about two months, forming a double bottom pattern. Contributing factors included a renewed optimism that the stock was presenting a buying opportunity at those levels after trading $688 in September 2012, a slight shift in business to introduce lower-price phones to try and penetrate the Asian markets, hope for strong sales of the upcoming release of the iPhone 5S and billionaire investor Carl Icahn disclosing a “large position” in the company all help the tech beast find some traction.

Icahn got investors blood pumping by saying that Apple was undervalued and that he was encouraging Apple chief executive Tim Cook to do a share buy-back to return value to shareholders.

As has become customary, Apple hosted an event this week unveiling not only its latest iteration of the iPhone, but also the less expensive version.  Whereas a little pop came on Monday in anticipation to have the stock pushing to try and achieve 8-month highs, things have fallen apart since.  The stock price fell on Tuesday from $506 per share to close at $494.64.  Wednesday is not looking much better as three large banks tagged Apple with downgrades with questions arising about the price of the less-expensive iPhone 5C possibly still be too expensive to crack the Asian markets that have been so elusive to Apple.  Competitors, namely Android devices, offer phones at about half the cost of the iPhone 5C $100 price tag (and over $700 without a contract), which may still limits Apple’s addressable market.

UBS (UBS) cut Apple from a “buy” rating to a “neutral” and dropped its price target from $560 to $520.

Credit Suisse Group (CS) moved Apple from “outperform” to “neutral” with pricing issues again leading the decision. Analyst Kulbinder Garcha has a $525 price target on AAPL.

Bank of America’s (BAC) Merrill Lynch downgraded Apple to “Neutral” from a “buy” rating, but maintained its price target of $520, expressing concerns over pricing that may not be cheap enough to grow market share.

On the bright side, some other analysts weren’t so worried.

Canacoord Genuity kept its “buy” rating and raised its price target from $530 to $550, citing Apple’s aggressive strategy to penetrate emerging economies.

Lazard Capital Markets upped its price target to $570 from $500.

Stuart Jeffrey, an analyst at Nomura, increased his price target to $480 from $420, citing the pricing of the 5C as signaling Apple’s margins will remain stable going forward.

All things being equal, shares of Apple are down about 5 percent in Wednesday morning trading, printing around $470 less than one hour after the opening bell.  So far in 2013 shares of AAPL are down about 10 percent.

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Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 109.60 0.49 0.45 20,406,525
BAC Bank of America Corporation 22.10 0.26 1.19 99,762,341
UBS UBS Group AG Registered 16.93 0.80 4.96 4,900,352
PRED Predictive Technology Group Inc 1.57 0.13 9.34 510

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