Apple hit with sharp stock drop following warnings

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Monday, Sep 29, 2008 11:00am

Apple hit with sharp stock drop following warnings

The worth of Apple stock has fallen significantly, over $20 as of press time, following warnings from two different analysts. Mike Abramsky of RBC Capital has downgraded Apple's rating from "Outperform" to "Sector Perform," with a new stock target of just $140, compared to an earlier value of $200. His FY08 EPS estimate has slid from $5.28 to $5.26, and in FY09, the prediction is now for $5.75 instead of $6.07. FY10 could slip from $8.03 to $7.38.

Abramsky links the downgrade with a "worsening consumer spending environment," particularly when it comes to Macs. A September ChangeWave survey indicates that just 29 percent intend to buy a MacBook in the next 90 days, as compared to 34 percent in August; likewise, only 26 percent are now looking to buy a Mac desktop, versus August's 30 percent. This is said the be the largest decline in these figures for two-and-a-half years. Interest in electronics is in fact said to have "the weakest outlook ever seen," with 40 percent planning on spending less in the next 90 days, despite the holiday season.

Morgan Stanley's Kathryn Huberty, meanwhile, has switched Apple stock from "Overweight" to "Equal Weight," slashing her expected price target from $178 down to $115. Her FY09 EPS has dropped from $5.91 to $5.47, while FY10 figures have been moved from $8.07 to $6.92. Huberty comments that computer sales are losing ground as a whole, except for the sub-$1,000 market, where Apple does not have anything to offer. Regardless, she notes, "even in the best of scenarios, AAPL’s EPS growth will decelerate meaningfully from June quarter levels."