Apple Stock Has Dropped 25%. This Analyst Says It’s Still the Best Bet in Tech.

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Morgan Stanley is preparing for a slowdown in consumer spending on tech hardware, slashing target prices on stocks across the sector, including

Apple
.
The tech giant’s stock, however, might still be the best bet in the space despite losing a quarter of its value in 2022.

With inflation at 40-year highs, “consumer spending intentions are turning more cautious, even for high-end consumer,” wrote analysts led by Erik Woodring in a note.

The team at the bank said that low- and mid-range consumer spending has been deteriorating for months, but that so far high-end spend has held up. That’s crucial because the top 20% of earners in the U.S. make up 40% of spending.

But with the

S&P 500
in a bear market, consumer confidence at a decade low, and inflation on everyone’s minds, “the risks of a pullback at even the high-end consumer are rising,” the analysts said.

Morgan Stanley sees the companies that make discretionary products and benefitted from the pandemic as at the greatest risk, but no one is spared: The bank has cut estimates for 2023 revenue in the sector by 5%, on average. 

Woodring and the other analysts also downgraded

Sonos

(ticker: SONO) to Equal-Weight from Overweight, lowering their price target on shares in the maker of audio products to $28 from $38.

Sonos

stock slipped 2.5% in premarket trading on Wednesday,

The price target on computer peripherals group

Logitech International

(LOGI) was slashed to $53 from $60; the stock was up less than 1% in the premarket.

GoPro

(GPRO), the camera maker, had its price target trimmed to $8 from $11, while instruments group

Garmin
’s
(GRMN) price target was lowered to $115 from $127.

Cricut

(CRCT), which makes computer-controlled cutting machines, had its price target dropped to $6 from $8.70.

The last stock standing was

Apple
.
While the tech giant and iPhone maker’s stock price was reduced to $185 from $195, the company remains the single stock in the sector rated at Overweight by Morgan Stanley. Shares in Apple traded 1% higher in premarket trading, poised to open around $134. It was down 25% this year through Tuesday’s close.

“While we remain positive on Apple’s ability to outperform peers both near-term and longer-term, tactically, we believe consensus estimates still need to come down to reflect weaker consumer spending,” Woodring and the other analysts wrote.

Write to Jack Denton at [email protected]