Apple stock fell anew on Monday after getting a price-target cut from investment bank Citi and suffering a legal setback in its dispute with wireless chipmaker Qualcomm (QCOM). But shares recovered for a modest gain late in the session.
XApple (AAPL) shares dropped as much as 2.8% in morning trading on the stock market today. The stock ended the regular session up 0.7% to 169.60. Since hitting an all-time high of 233.47 on Oct. 3, Apple stock has tumbled 27.4% through Monday's close.
Citi analysts cut their price target on Apple stock to 200 from 240. They also outlined a bear-case scenario where Apple could fall to 125. That could happen if Apple's revenue growth slows to 2% to 3% a year and gross margins are much weaker than expected.
Citi blamed sales weakness in China and possible negative impact of the U.S.-China trade war for its reduced outlook for Apple. China accounted for 18% of Apple's revenue in the September quarter.
"In order for the stock to move higher we believe investors will await for consensus estimates to move lower," Citi said in a report.
Qualcomm Wins Preliminary Injunction In China
Meanwhile, Qualcomm won a preliminary injunction against the sale of older model iPhones in China. The Fuzhou Intermediate People's Court in China ruled that Apple violated two of Qualcomm's software-related patents for resizing photographs and managing applications on a touch screen. The court's preliminary injunction affects the iPhone 6S through last year's iPhone X.
Apple could update the software to remove the infringing features and continue selling the phones.
"Qualcomm's effort to ban our products is another desperate move by a company whose illegal practices are under investigation by regulators around the world," Apple said in a statement to CNBC. "All iPhone models remain available for our customers in China."
Apple and Qualcomm are locked in a legal fight over patent terms and royalties.
KeyBanc Reduces Apple Sales, Earnings Estimates
In a report Sunday, KeyBanc Capital Markets analyst Andy Hargreaves said soft iPhone XR demand suggests Apple has hit the limit of its pricing power. A larger-than-expected number of consumers prefer less-expensive, older-model iPhones, he said in a report to clients.
"This suggests a growing number of consumers see little value in hardware updates (even screen size) and no longer see social value in the newest iPhone models," Hargreaves said. Apple can no longer count on increased pricing to drive revenue growth, he said.
Hargreaves lowered his Apple revenue and earnings estimates for fiscal 2019 and 2020. That came after he cut his estimates for iPhone unit sales and average selling prices. He reiterated his sector weight rating on Apple stock.
U.S.-China trade relations and the potential for regulatory scrutiny with Apple's App Store remain key risks, he said.
RELATED:
