Apple's stock just plunged, but Wall Street is telling clients to hold on for dear life

  • While a swath of analysts slashed their price targets on Apple following the company’s revenue warning, the majority are not turning all-out bearish just yet.
  • Of the major Wall Street analysts covering Apple, 23 carry a “buy” rating, 23 carry a “hold” rating, and two carry a “sell” rating.
  • While nearly 30 analysts lowered their price targets on Wednesday and Thursday, just three lowered their ratings. In other words, the vast majority are advising their clients to keep holding on.
  • “Despite slowing iPhone sales, we still anticipate Apple will continue to grow its install base,” one analyst said.

Apple was the biggest story on Wall Street Thursday as shares plunged 10% to levels not seen since mid-2017 and equity analysts slashed their price targets left and right.

But the vast majority of analysts aren’t retreating into bear country, with some suggesting the company’s installed base is intact, and that the problems surrounding Apple – largely slowing iPhone sales – are confined to the Chinese market.

After US markets closed on Wednesday, Apple told investors it would report fiscal first-quarter revenue below prior estimates, warning mainly on weak iPhone demand in China. The iPhone accounts for a hefty 63% of Apple’s total revenue, according to UBS (followed by services, at 14% of the company’s total revenue), and the announcement spooked shareholders. Apple shares have now plummeted almost 40% from their October 2018 high.

While nearly 30 analysts lowered their price targets on Wednesday and Thursday, just three shops – Jefferies, Macquarie, and Loop Capital Markets – lowered their ratings. None dropped their rating to a “sell.” Out of the major Wall Street analysts tracked by Bloomberg, 23 carry a “buy,” 23 carry a “hold,” and two carry a “sell.”

In other words, analysts are advising investors to keep holding on despite the losses.

Take Mike Walkley, who covers Apple for Canaccord Genuity. In a note out Wednesday, he lowered his iPhone unit sales estimates and his target price on the stock from $US225 to $US190 – still quite a bullish view, forecasting a 33% gain from current levels. He reiterated his “buy” rating.

“Despite slowing iPhone sales, we still anticipate Apple will continue to grow its install base and believe the company’s ecosystem will contribute to ongoing growth, particularly for higher-margin Services and Other Products,” Walkley said.

“We maintain our belief Apple can expand its leading market share of the premium-tier smartphone market and the iPhone installed base (excluding refurbished iPhones) will exceed 700M in 2018.”

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Others echoed a similar sentiment. Angelo Zino, who covers Apple for CFRA Research, in a note out Thursday morning, maintained his “buy” rating, but took down his price target from $US215 to $US195.

“We note a number of potential catalysts including the release of a video streaming offering, 5G iPhones in CY 20, and more aggressive share repurchases,” he wrote.

Zino told Business Insider he would be more concerned about Apple’s warning if its guidance appeared to be a more broad-based issue, but it was rather “iPhone-centric,” and more or less contained in China for now.

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Meanwhile, Wedbush analyst Dan Ives called the episode the “darkest day in the iPhone era,” but reiterated his “outperform” rating and slashed his price target from $US275 to $US200.

Finally, Instinet analyst Jeffrey Kvaal said China is the main macroeconomic challenge facing Apple right now.

“Apple indicated the conditions in the rest of the world are a secondary factor,” he wrote to Business Insider in an email on Thursday.

“Within China, I think it is right to say both macro and product cycle issues are in play. Certainly the smartphone market in China has been soft for everyone, Apple included.”

Kvaal reiterated his “neutral” rating on the stock, but took his price target down from $US185 to $US175. When asked whether he believed Apple’s sales warning was a more sweeping sign of economic trouble, Kvaal didn’t quite respond.

“This is well above my pay grade – I’m just a tech analyst.”

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