Investment banks Morgan Stanley and RBC Capital have both downgraded their target price on Apple Inc,
Both downgrades prove that Apple is not immune to the overall economic downturn we are experiencing. Overall slowdown in demand for their products was expected and it will most likely get a little worse before we see it turn around.
RBC’s Mike Abramsky says his bank’s latest consumer survey shows Mac purchase intentions for laptops and desktops “suddenly moderating” from August — “the biggest declines in 2.5 years.” And more broadly, 40% of people plan on spending less money on electronics in the next 90 days — “the weakest outlook ever seen.” Abramsky trimmed his Mac outlook.
Abramsky, who cut his price target on Apple shares to $140 from $200, suggested the company could use some of its $21 billion in cash to repurchase about 5 percent of its outstanding shares “without significantly impacting its financial position and return to shareholders some of its expected strong fiscal 2009/2010 cashflow.”
Morgan Stanley’s Kathryn Huberty points out that the remaining source of growth in the PC market is in the sub-$1,000 market, where Apple currently sells no products. “Lastly, we believe multiples for high growth stocks will continue to compress in the current environment and, in the context of our 6% fiscal 2009 per-share earnings growth assumption, we don’t believe Apple is immune to this trend,” Huberty wrote.
Apple is widely believed to be introducing an overhauled notebook line in the coming weeks, which would boost interest in their products prior to the holiday season. Expect Apple to have a wide range of extremely competitive products, at highly-aggressive pricepoints on the market come this holiday season.
