14 DAY TRIAL // Apple's shares fell to their lowest level in over a year, to a whopping $105.26 per share, a $22.98 decrease resulted from Mike RBC Capital and Morgan Stanley's cutting their ratings on the company's stock. The two firms are predicting a high probability that consumers no longer be eager to spend cash on high-end electronics.
Apple is well known for selling computer solutions above the $1,000 selling point, something the two brokerage firms have taken into account when cutting their ratings on Apple's stock. RBC Capital’s Mike Abramsky, for instance, cut his rating to Sector Perform from Outperform. His price target on the shares is now $140, down from $200.
However, slowing demand is not the only aspect plaguing Apple's shares. Technical issues surrounding the iPhone 3G are also responsible for the drop, sources indicate. Abramsky added that his cautious stance reflects “a worsening consumer spending environment,” influenced by a recent survey RBC conducted with research firm ChangeWave.
The firm found a radical drop in the number of consumers interested in Apple's computing solutions. Abramsky lowered his Q4 estimates to 2.9 million Macs sold (from 3 million). The researcher says there is “elevated risk” of disappointment with Q1 guidance. Abramsky did raise his Q4 iPhone unit estimates to 6 million (from 5 million), despite everything else.
As for Morgan Stanley’s Kathryn Huberty, she cut her rating on Apple's stock to Equal Weight from Overweight. Dropping to $115 from $178, her target estimates also lowered to $5.47 from $5.91 for fiscal 2009, and to $6.92 from $8.07 for fiscal 2010. According to Morgan Stanley's analyst, “PC unit growth is decelerating and the remaining source of growth is increasingly the sub-$1,000 market where AAPL does not play.” Huberty added that, “even in the best of scenarios, AAPL’s EPS growth will decelerate meaningfully from June quarter levels.”