Apple Inc. shares buckled on Thursday amid another wave of selling pressure that wiped out hundreds of billions of dollars in market value from the largest US technology stocks.
The iPhone maker suffered a drop of as much as 6.1%, on track for its worst decline in two years, after a rare analyst downgrade from Bank of America warning of weaker consumer demand for its popular devices. The selloff erased more than $140 billion from Apple's market capitalization.
There were few places to hide on Thursday with investors dumping stocks as Federal Reserve officials continue to talk tough on raising interest rates in the central bank's fight against inflation. As of 2:40 p.m. in New York, there were just two gainers in the Nasdaq 100 Stock Index, which was on pace for its worst decline in two weeks. Amazon.com Inc. and Alphabet Inc. fell more than 4%, while Microsoft Corp. dropped more than 2%.
Apple has been treated as a haven for much of this year, outperforming fellow mega-caps and the wider tech gauge amid a steep selloff driven by recession fears. The world's most valuable company with a market value of nearly $2.3 trillion has now fallen 20% in 2022, compared to the 32% declines for the Nasdaq 100.
With consumer spending expected to cool across regions, BofA analysts led by Wamsi Mohan downgraded the recommendation to neutral from buy. The analysts said demand for Apple's services has already slowed and product demand is likely to follow, pressure from a stronger dollar will only add to its woes.
While "Apple's long-term prospects remain favorable," BofA expects negative estimate revisions and valuation risks in the near-term.
Semiconductor demand is influenced heavily by discretionary consumer spending, BofA analyst Vivek Arya wrote in a separate note. However, Arya said that "risks to Apple suppliers are in a benign 1%-5% range and hence unwelcome but not a calamity."
A Bloomberg report said that Apple is backing off plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialize.
The report confirmed analyst production estimates and bullish brokerages pointed to the demand in the higher-end iPhone 14 Pro line as a positive for the tech behemoth.
Meanwhile, Rosenblatt Securities analyst Barton Crockett, who had a neutral rating on the stock since initiating coverage in April, raised his recommendation to buy, citing "substantial interest in Apple's new iPhone 14 Pro Max and Ultra watch."
"We see reason to believe that consumers in other countries share this enthusiasm, prompting us to embrace more constructive near-term and long-term estimates," Crockett said.
Apple's buy ratings have risen steadily going from 28 in the end of 2020 to 37 as of Thursday. It also has 10 holds and two sell recommendations, according to Bloomberg data.