By Tomi Kilgore, MarketWatch
Shares of Apple Inc. tanked Thursday, after the technology giant’s revenue warning triggered an avalanche of price target cuts by Wall Street analysts.
Half of the 41 analysts surveyed by FactSet cut their targets, some by as much as $100.
That knocked the average target down by about 13% to $187.03, from $215.91 on Monday, marking the lowest average target since it ended October 2017 at $179.32. The average rating remained at the equivalent of buy, as the new target was about 32% above current prices.
The stock /zigman2/quotes/202934861/composite AAPL +1.20% sank $15.73, or 10%, on Thursday to close at the lowest level ($142.19) since April 2017. That’s the biggest one-day percentage decline since January 2013, while the price decline was the biggest since the stock started trading in December 1980, according to FactSet. The price drop shaved about 107 points off the Dow Jones Industrial Average’s price /zigman2/quotes/210598065/realtime DJIA +0.68% , which sank 660 points on Thursday.
The selloff pushed Apple’s market capitalization down to about $674.7 billion, the lowest since it closed at $637.7 billion on Jan. 31, 2017, according to FactSet. Apple’s market cap fell below Google-parent Alphabet Inc.’s /zigman2/quotes/202490156/composite GOOGL +3.58% $713.2 billion, to knock Apple down to fourth on the list of most valuable U.S. companies.
Goldman Sachs analyst Rod Hall chopped his price target by 42% to $140 from $240, while maintaining the neutral rating he’s had for the past 11 months. Beyond China, Hall is also concerned by weaker rates for iPhone replacements, likening Apple’s current predicament to the one that knocked Nokia Corp. off its perch more than a decade ago. Read more about Apple’s revenue warning.
Analyst Brian White at Monness Crespi Hardt also slashed his target by $100 to $200, but kept his rating at buy, citing a valuation that he believes is “depressed.” He said Apple’s net cash position of $25.29 a share help keep him bullish.
Meanwhile, Jefferies’ Timothy O’Shea downgraded Apple to hold, and cut his price target to $160 from $225, citing concerns over how the company will deal with its biggest “miss” in years.
“We still think Apple can build a massive services business over time. But [Apple] hasn’t missed its guide in years, so the extent of this miss suggests it is navigating uncharted waters,” O’Shea wrote in a note to clients. “We move to the sidelines and wait for clarity as uncertainty grows around the hardware business.”
In Apple’s latest annual report, filed on Nov. 5, iPhone sales of $166.7 billion represented 63% of total sales, up from 62% a year ago.
Wedbush analyst Daniel Ives lowered his stock price target to $200 from $275, saying the “massive” negative outlook represents “Apple’s darkest day in the iPhone era,” which began June 2007.
“Last night Apple delivered a bombshell negative preannouncement that will be a defining moment for Cook & Co. for years to come,” Ives wrote in a research note. “Although the company had some soft quarters over the past 20 years that missed Street expectations, in the modern iPhone era last night was clearly Apple’s darkest day in our opinion and represents a challenging growth period ahead for the company (and its investors).”
Tim Cook became chief executive officer of Apple in August 2011.
Ives kept his rating at buy despite the “black eye” results, because he believes Apple is an “installed base story of 750 million active iPhones worldwide,” with nearly half of those in the window of upgrade opportunity over the next 12-to-18 months.
Apple’s “bombshell” also hurt shares of its suppliers, even though many had already issued revenue warnings in recent months citing weakening demand from a large smartphone customer.
Shares of Lumentum Holdings Inc. /zigman2/quotes/204419752/composite LITE +0.61% lost 8.4%, Qorvo Inc. /zigman2/quotes/209919828/composite QRVO +0.88% tumbled 9.1% and Skyworks Solutions Inc. /zigman2/quotes/201417573/composite SWKS +0.85% slumped 10.7%. Austria-based AMS AG’s /zigman2/quotes/205647546/delayed CH:AMS -0.09% plunged 23.2% in overseas trading.