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Apple shares fall 17.5 percent

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Dawn Kawamoto CNET News

Published: 30 Sep 2008 08:10 BST

Apple's shares fell 17.5 percent in early trading on Monday, as two noted brokerage firms scaled back their recommendations from 'buy' to 'hold'.

Apple fell as low as $105.77 (£58.30) a share in trading, down substantially from its close of $128.24 on Friday. Apple's shares sold off sharply after Morgan Stanley and RBC Capital Markets downgraded the stock.

Morgan Stanley not only revised its recommendation for the stock, but also lowered its fiscal 2009 earnings estimate to $5.47 a share, from $5.91 a share.

Listing the reasons for its revisions, Morgan Stanley said in a research note: "First, PC unit growth is decelerating and the remaining source of growth is increasingly in the sub-$1,000 market where Apple does not play. Second, even in the best of scenarios, Apple's earnings-per-share growth will decelerate meaningfully from June-quarter levels."

"A combination of tough compares [with the previous year's figures] and investments in iPhone growth drive our December-quarter earnings per share to a decline of eight percent year over year, down from +29 percent growth June," states the note.

Morgan Stanley added that it expects Apple to offer a more conservative guide to Wall Street and investors for the three-month period ending in December.

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RBC Capital Markets downgraded Apple's stock based on "elevated risks" from a slowdown in consumer spending.

According to RBC Capital Markets' research note: "In a worsening consumer-spending environment, we are downgrading from 'outperform' to 'sector perform' on: 1) reduced visibility growth, margins; 2) elevated risks to valuation."

RBC Capital Markets noted in its report that its September data showed the number of those intending to purchase a Mac laptop within the next 90 days has dropped to 29 percent, compared with 34 percent in August. Those expecting to purchase a Mac desktop fell to 26 percent, from 30 percent, in the same period.

Credit: Apple shares drop 17.5 percent from CNET News