Analyst watching Apple (AAPL) are chopping down targets after CEO Tim Cook's tempered first-quarter forecast.
Shares of the tech giant that once counted itself as the most valuable company in the world have declined nearly 8% in morning trading, marching toward the biggest one day drop in five years, on the back of the pre-announcement on Wednesday evening. The inauspicious announcement has provoked swift slashes to price expectations on Wall Street and even a few downgrades.
In fact, every analyst publishing research following the announcement at least tempered their targets for the company, with three downgrades from Jefferies, Macquarie, and Loop Capital hitting shaking the stock.
"We downgrade to Hold as AAPL's business in China appears to be rapidly deteriorating with the revised outlook for iPhone materially worse than our below-consensus estimates," Jefferies analyst Timothy O'Shea explained. "We move to the sidelines and wait for clarity as uncertainty grows around the hardware business."
Based on the significant change in forecast, one that includes a 10% reduction in overall iPhone sale estimates, O'Shea reined in his price target from a lofty $225 per share to just $160.
Apple analyst target price redux since last night:
Bernstein $160 <- $210— Dominic Chu (@TheDomino) January 3, 2019
BofAML $195 <- $220
MS $211 <- $236
JPM $228 <- $266
Goldman $140 <- $182
UBS $180 <- $210
Citi $170 <- $200
Macquarie $149 <- $188
BMO $153 <- $213
Wells Fargo $160 <- $210
The FactSet consensus price target has fallen in line with the cuts, dropping from $218.73 at year-end to $188.51 Thursday morning.
Jim Cramer noted that the reduction in sales in the Chinese market that was largely blamed for the disappointing forecast is unlikely to abate any time soon given the nationalistic buying prevalent among the socially-scored citizenry of China.
"There are too many unanswered questions: weakness in China, cellphones a losing category, Qualcomm (QCOM) a factor, Chinese government subtly suggesting buy Huawei now that it is shut out of the west," he explained, outlining a list of impacts motivating further downside risk.
Cramer suggested that Apple's bottom will not come until it hits a PE ratio of about 10, meaning the stock could fall to just $120 per share, marking the lowest level in two years.
Real Money contributor Ed Ponsi added that weakness in the Chinese economy could prevent buyers not bothered by Xi Jinping's intrusion into their lives, pointing to weakness in Chinese manufacturing numbers as a sign of a persistently weak Chinese consumer that will remain averse to buying expensive phones.
To be sure, there was one analyst with a "glass half full" outlook and surprisingly it was a consistently bearish stock-watcher.
"We see limited further relative downside to the stock," New Street Research analyst Pierre Ferragu said on Thursday. "Our thesis has played out in full and things are as bad as they can be."
As a result of the sky sufficiently falling at this point, Ferragu raised his rating from "Sell" to "Neutral".
Still, his price target was reined in to $140 from $160 per share, as even his bearish outlook didn't foresee the fast fall Cook's company was headed for.