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Apple bulls on the run: Analysts take a hard second look

A staff walks inside an empty Apple store during the release of iPhone 5 in Beijing's Wangfujing shopping district, December 14, 2012. Recent slide in company’s may be linked to new technology being tested by China's top telecoms carrier.

PETAR KUJUNDZIC/REUTERS

Another day, another Apple Inc. selloff – and you have to wonder if analysts are now playing catch-up with the stock as it explores 10-month lows.

In trading on Friday, Apple shares slid 3.8 per cent, closing at their lowest level since February.

Some analysts, who had been drooling over Apple's stock with an overwhelming number of "buy" recommendations and exceptionally bullish price targets, are starting to pull in their horns.

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UBS analyst Steven Milunovich cut his target on Friday to $700 (U.S.) from $780 previously. Earler this month, Peter Misek at Jefferies trimmed his target to $800 from $900.

To be sure, analysts are still wildly enthusiastic about Apple, with 86 per cent of them recommending the stock as a "buy" with an average price target of $747 – implying a 46 per cent return from the current price. And even the two target reductions from UBS and Jefferies still imply a very good run for the stock.

But with Apple's share price down 27 per cent from its high in September, it might only be a matter of time before analysts take another, more sober, look at the stock now that Apple has begun to look accident prone.

On Thursday, a federal jury in Delaware ruled against Apple in a patent dispute with MobileMedia Ideas LLC, which is partly owned by Nokia Corp. and Sony Corp. – marking an embarrassing setback for Apple, which has been aggressively moving against other companies, including Samsung, for perceived patent infringement.

Apple's built-in navigation system for the iPhone hit a few well-publicized snags three months ago, resulting in a high-profile executive dismissal from the company. And now Google Inc. has launched Google Maps as an iPhone app – and early indications suggest consumers are clamouring for it.

Apple has also been struggling to strike a deal with China Mobile, the country's biggest wireless carrier, to carry its iPhone. As Reuters reported on Friday, China is a big market for Apple, thanks to other carriers, but no China Mobile deal means that Apple's market share in the country is shrinking relative to other brands.

Investors might also be worried by China's lukewarm reaction to the iPhone 5, as my colleague Darcy Keith reported earlier.

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Analysts have an amazing ability – along with, cough!, the media – for riding stock market trends. Apple's rise was met with bigger and bigger price targets, along with novel observations about Apple's enormous profitability and cash hoard. (What to do with all that money? "How about buying employees multiple Ferraris? Or feeding the world Big Macs?" Bloomberg News suggested in late July).

Now, the trend might be heading in the other direction.

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About the Author
Investing Reporter

David Berman has been writing about business and investing since 1995. He has written for a number of magazines, including Canadian Business and MoneySense. He worked at the Financial Post as an investing writer and daily columnist before moving to the Globe and Mail in 2008. More

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