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Apple dives as top four investment banks slash ratings
by Robert St George on Sep 11, 2013 at 14:53
Apple has been downgraded by analysts at UBS, Credit Suisse, Bank of America Merrill Lynch and JP Morgan amid fears over its pricing strategy.
Shares in the firm slumped by 4.5% shortly after the opening bell on Wall Street as the market digested the news.
Steven Milunovich at UBS deemed Apple’s approach for its latest iPhone a ‘head scratcher’, noting that its smartphones will be competing against comparable Android devices up to 50% cheaper.
He pointed out that a recent survey of 35,000 Chinese consumers indicated that only 2.6% of respondents would consider purchasing the iPhone 5C at the proposed $549 level.
The team at Credit Suisse agreed that ‘by ignoring the mid-tier smartphone segment, Apple will continue to lose users to the Android ecosystem’. It estimated that Apple’s smartphone market share would decline to less than 16% this year and next from over 18% in 2012.
Scott Craig of Bank of America Merrill Lynch agreed that the lack of a cheaper phone was a ‘disappointment’.
All four downgraded the stock to ‘neutral’.
An immediate response from Bespoke Investment Group tried to find a sliver lining, pointing out that whenever Apple has previously tumbled in early trading, it has tended to recover through the day more often than not.
Bespoke showed that the 23 times over the past 10 years that Apple has started a session so poorly - typically after an underwhelming product launch - it shares have ended up above their level at the previous day's close two-thirds of the time.
Despite the downgrades, the analyst community still predicted that Apple's shares would rise over the near term. From today's price of $470, Bank of America Merrill Lynch set a price target of $520, as did UBS, while Credit Suisse opted for $525.
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