Apple (AAPL) has, at least briefly, lost the mantle of world's most valuable company after President Donald Trump doubled down on his hawkish trade policy Monday.
Shares of the Tim Cook-led tech giant have fallen more than 2% in pre-market trading Tuesday, abdicating the throne of most valuable company in the world to Microsoft (MSFT) .
The most recent decline is being spurred on by heightened trade war talk from President Trump in an interview with The Wall Street Journal, published on Monday evening.
"Here's the story: If we don't make a deal, then I'm going to put the $200 -- and it's really $67 -- billion additional on at an interest rate [sic] between 10 and 25 depending."
The Journal's reporter Bob Davis asked if that would include iPhones, the staple product of Apple.
"Maybe. Maybe," the president replied.
Analysts quickly added the previously "background noise" issue to their forecasts, putting yet more pressure on demand.
"Now Cook and Apple find themselves squarely at the center of the tariff talks which were previously background noise," Wedbush analyst Daniel Ives wrote in a note on Monday night. "With ASPs for the iPhone in the $800 range and consumers clearly price sensitive around higher smartphone prices the last thing Cook and investors want to see is additional tariffs added to iPhones."
He acknowledged that the talk from Trump could indeed be yet more bluster to encourage a more favorable trade deal, but nonetheless urged caution on the "near-term overhang" until more clarity becomes available on the negotiation.
Target Trimming...Again
Apple has endured a spate of lowered estimates in recent weeks from analysts along the Street and has even been downgraded by firms such as Guggenheim and Rosenblatt Securities.
The downgrades and price cuts have helped stoke an over 20% decline for the Cupertino, California-based company. Unfortunately for shareholders, analysts are not easing up in their target trimming amid added demand pressures.
"We're reducing our price target to $225 from $259 and lowering our estimates based on a reduction in our iPhone unit estimates," Loop Capital analyst Ananda Baruah wrote in a note on Monday evening.
Baruah noted that supply chain problems, which are impacted by China given the company's reliance on Chinese-based Foxconn for production, present an issue as well.
According to FactSet, a total of nine analysts publishing research in November have slashed their price targets based on the issues impacting both supply and demand for the company's flagship product, which will now go unreported in quarterly releases. Some, like Goldman Sachs, have done so more than once.
I wasn't kidding about my Apple contest…and I'll be talking $AAPL and more at the 11:30 club call: https://t.co/kEg5vibcFm https://t.co/VsMzskh3LV
— Jim Cramer (@jimcramer) November 14, 2018
Entry Point Proposition
Still, the company's dimming star in recent months has offered a more attractive entry point for opportunistic investors.
Large investors, most notably Warren Buffett, have not shied away from increasing their positions in the company as its forward P/E ratio has come down to a paltry 12.8 on Tuesday morning.
Some analysts have maintained their strong outlook for the company moving forward, especially as it wields over $100 billion in free cash flow to buy back its stock at these lower levels.
"We maintain our Outperform rating, as we think that in an increasingly "risk-off" environment, AAPL with its strong balance sheet, aggressive buyback, and ability to drive gross margins higher remains a core large-cap tech holding," RBC Capital markets analyst Amit Daryanani said.
Loop Capital's Baruah echoed the sentiment, noting a reined in estimate but bullish overall outlook.
"We are maintaining our Buy rating as AAPL's EPS power of $15.00 and median P/E of 15x still make it an attractive long-term investment in our view," he said.
As the stock slides, the entry point offered will be at the lowest level since May 1.
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