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The favorite pastime of Apple analysts has turned into "how low can it go?" Along with that question is whether the tech giant can retain its title as the world's most valuable publicly traded company.
In trading Friday, shares of Apple (AAPL) dipped below $441 a share, reducing its market cap to $413.96 billion, below Exxon's $416.95 billion (XOM). Last year, investors and analysts swooned as Apple shares soared and it surpassed the oil giant's longstanding No. 1 spot.
Wall Street analysts loved Apple stock so much in 2012 that they raced to bump up price targets as shares surged to their $700-a-share peak.
With the stock price in free fall, analysts can't seem to take their price targets down fast enough.
Following Apple's report of weaker-than-expected revenue and slackening demand for its gadgets as it loses the innovative edge, the shares collapsed $63.51, or 12%, to $450.50 Thursday. It's the latest in what's been a major deflation of a one-stock bubble, falling 36% from its high in September.
And analysts are now responding. "Things have changed," says Kim Caughey Forrest of Fort Pitt Capital Group. "This was a momentum stock."
Apple's momentum now is clearly on the downside, as seen by the fact analysts are:
• Slashing price targets. Seven of the roughly 50 Wall Street brokerage firms that follow Apple stock cut their price targets Thursday, says data from Briefing.com. Compare that with September 2012, when Apple shares were peaking and four Wall Street firms upped their price targets to an average of $757 a share. Prior to Thursday, another five analysts cut price targets in January. Analysts cut targets after price falls because they "want to look less silly," says Sheraz Mian of Zacks Investment Research.
• Taking down price targets by a big margin. The seven analysts who cut price targets Thursday took them down by 18% on average to $589 a share, Briefing.com data show. Deutsche Bank, for instance, slashed its price target on Apple from $800 a share to $575, a 28% cut. The average price target for Apple is now $641, down from $720 before earnings were released late Wednesday, says John Butters of FactSet.
• Cutting their forecasts for earnings. It's not just analysts' forecasts for stock prices that are being cut, but their views on fundamentals such as revenue and earnings, too. In the one day after the earnings release, analysts have cut their forecast for Apple's full-year profit by nearly 7% to $52.39 a share, Butters says.
Analysts cite a variety of reasons for their price target cuts, but most are linked to growing evidence that the popularity of Apple's products is waning as rivals pass them up with new features and products, says Jharonne Martis, analyst at Thomson Reuters' StarMine unit, which tracks analyst changes. And lacking breakthrough new products, there's little reason for analysts to boost targets, says Kei Kianpoor, CEO of analyst tracker Investars.com.
Despite taking target prices down, though, analysts remain surprisingly bullish, Butters says. Even after the stock's collapse, 46 of the 53 Wall Street analysts maintain buy ratings on the stock, he says. "Maybe we'll see more ratings changes next," he says.
Yet investors might be frustrated that the analysts are taking down price targets now after the stock has already been pummeled instead of warning investors ahead of time. "There's a fair amount of herd mentality in the analyst community," Mian says. "That's why they (analysts) are usually behind the curve."