BofA Downgrades Apple Shares, Sparks Tech Stock Price Drop

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Tech companies’ stocks drop after BofA downgrades Apple.
Source: Sigmund via Unsplash.com

On Thursday, Bank of America (BofA) announced the downgrading of Apple shares. The unfavorable rating led to a general drop in tech stocks. The NASDAQ Composite also fell by 2.8%—its biggest drop since September 14.

Here’s how much tech companies’ share prices dropped:

  • Apple: -4.9%
  • Alphabet: -2.6%
  • Amazon: -2.7%
  • Microsoft: -1.5%
  • Meta: -3.7%
  • Tesla: -6.8%

For Apple, this drop completes a total 20% drop for the company this year. Moreover, reports indicate that Apple will not be increasing the production of its latest devices. Its supply-chain reliance on China will also continue. 

In particular, reliance on China is what sparked the tech stock price drop. Investors are worried about the increasing conflict with the Asian superpower. If the other tech giants do not succeed in decoupling from China for their supply chain needs, their stocks will probably not recover.

BofA Dropped Apple’s Share Price over Low Interest

Apple had stayed positive on the back of growing demand for its products in the domestic market. This positive rating was despite the overall drop in economic activity and fears of a recession in the US. Now, the demand seems to have decreased. This led Apple to cancel the production of 6 million iPhone-14 models in the second part of the year.

Reportedly, Apple’s new line of flagship smartphones isn’t performing as expected. 

The price for Apple Inc. (AAPL) currently stands at roughly $142, which is almost the same as it was in the previous year. Such performance alone can diminish trust in the company.

Closeup image of a hundred dollar bill (Benjamin Franklin side).
Investors are agitated over a number of subjective factors than the actual performance of tech stocks.
Source: Adam Noir via Unsplash.com

Share Prices Drop for Alphabet and Microsoft

Microsoft experienced the lowest drop in stock on Thursday. Moreover, Microsoft has suffered a 29.05% drop in its YTD value.

Microsoft hopes to reverse its luck with the release of Windows 11. In addition, Microsoft is also trimming down its range of product offerings. 

Alphabet, Google’s parent company, dropped by 2.6%—its lowest stock price in almost a year. 

Additionally, the price of GOOGL stock has dropped to under $100 for the first time since January 2021. Like Apple, investors may look to these indicators more than the company’s objective market performance.

In January next year, Google will also be pulling the plug on its Google Stadia project. The project was to rival Sony and Microsoft’s cloud gaming offerings.

Amazon and Meta Have Also Landed in Trouble

In the last year, Amazon lost the gains it made during the pandemic. Additionally, it also lost almost a third of its value. On Thursday, it lost an additional 2.7%. The company’s stock price dropped to $113 by the end of trading.

Moreover, Amazon shares proved to be more volatile than its competitors. Amazon’s stock price has varied constantly for two years, landing individual and short-term investors in a bit of a bind. It is currently unknown if Amazon can rebound to its 2021 levels or return to its pre-pandemic value.

Finally, Meta experienced a 3.7% drop. The drop has added to Meta’s worries for this year. Meta, formerly Facebook, dropped almost 60% in 2022 alone. This performance followed after CEO Mark Zuckerberg pushed for the Metaverse project.

Though the Metaverse idea is gaining some traction, the demand is muted. Plus, it offers no clear business advantage over Facebook marketplace or Amazon.

But experts believe Meta’s stock price will go up. Mainly because the company still holds objective value and a huge customer base. 

Image of a bull statue from the side.
Regardless of the indicators, we might be looking at a future bull market.
Source: Hans Eiskonen via Unsplash.com

Ratings Are Now at “Buy”

For Apple, it wasn’t all bad news. Rosenblatt Securities’ projected position on Apple stock is now at “buy”. This means the New York-based institutional broker believes Apple’s stock price will only go up from here.

The broker’s “buy” rating is a call to institutional investors to place more faith in the company. Additionally, it might also point to a reduction in reliance on China.

Regardless, the company’s future depends on iPhone 14’s performance. So, the stock price could still rise if Apple’s new flagship products perform well.

Moreover, other tech giants could also regain their position if relations with China improve. 

Possible Reemergence of a Bull Market

Currently, a wide variety of factors indicate an economic slowdown. Investors will conserve their capital, given the interest rate increase, disrupted supply chains, and a general decrease in economic activity.

But, the market will counter these simultaneously occurring forces. What some view as a problem may become an opportunity for others. So, the question is if the latter will prevail. If so, investors may be in for a bullish market.

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