Analyst Downgrade Apple Stock but it Fights Back

Apple stock (AAPL) trending news again, as it plunged below $500 a share at $499.22, down $10.57, or 2.07% in trading early Monday morning for the first time before recovering to a price of $518 a share at close and $532.52 at the time of this post (12:44EST) on Tuesday.

AAPL has plummeted 28% from its all-time high of $705.07 recorded when the iPhone 5 first launched in late September.

This time the devaluation is strongly linked to downgrades issued by Citi, who cut their price target for AAPL from $675 to $575 Sunday night, because of larger than expected cuts to production for the quarter after the holiday season. All three of Citi’s Apple analysts, Glen Yeung, Walter Pritchard and Jim Suva agreed to cut the price target—and also the stock’s rating, which has been downgraded to “neutral” from “buy.”

Experts also expect Apple to post a year-over-year earnings decline for the current quarter as of Monday, with EPS dropping to $13.31 from $13.87 last year and a negligible increase this quarter from $12.30 to $12.36 due to a drop in sales and margin compression—the issue that is causing most analysts to be pessimistic about a recovery in the near future. This will be the first time such a decline has occurred for Apple since the iPhone launched five years ago and could further shake already wavering investor confidence.

Combined with later downgrades issued by Mizuho Securities USA, Canaccord Geunity and Pacific Crest Securities that took place Monday, Apple received four total downgrades in a less 24-hour period.

This change echoes UBS and Jeffries group decisions to cut price targets. Last week they cut their targets from $760 to $700 and from $900 to $800, respectively, causing the stock to fall 4 percent during Nasdaq’s Friday trading session.

Monday’s downgrades were made despite later upbeat reports of record iPhone 5′s sales in China, with the Cupertino-based company selling over two million at launch this weekend—beating its previous Chinese releases.

In reference to record-breaking sales Apple’s new CEO Tim Cook stated, “Customer response to iPhone 5 in China has been incredible, setting a new record with the best first weekend sales ever in China. China is a very important market for us and customers there cannot wait to get their hands on Apple products.”

It’s been a tough quarter for Apple, as shares have plummeted since topping out at $700 in mid-September. Some experts, however, remain hopeful that innovation in other areas and higher-than projected iPhone sales in China will cause the stock to rise again.

Evan Niu, The Motley Fool’s resident Apple expert, notes that most investors aren’t even taking the new market opportunity Apple is facing with its recently launched Apple TV product. According to Morgan Stanley’s Katy Huberty, Apple stands the potential to sell a large number of units

She bases her projection on a recent survey that shows 11% of U.S. households of a 1,500 sampling are interested in purchasing an Apple TV set which may imply upwards of 13 million potential unit sales domestically.

Will AAPL see $700+ share prices again?