Tech stocks took a hit on Monday after Apple (NASDAQ:AAPL) shares were downgraded over the weekend, causing them to trade down nearly 4 percent.
Mizuho Securities’ Abhey Lamba downgraded the technology giant to neutral from buy on Sunday, cutting his 12-month price target to $150 – around one dollar above where Apple closed Friday.
“The stock has meaningfully outperformed on a YTD basis and we believe enthusiasm around the upcoming product cycle is fully captured at current levels, with limited upside to estimates from here on out,” wrote Lamba in a note.
The Nasdaq index fell around 2 percent on Friday after the main technology giants Apple, Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Facebook (NASDAQ:FB) and Amazon (NASDAQ:AMZN) shaved nearly $100 billion off their market value despite a lack of specific news. Investors are beginning to question whether these popular stocks are overvalued, despite Goldman Sachs retaining confidence in the potential of the technology sector.
Goldman Sachs’ David Kostin said he expected technology stocks to continue to outperform the markets as long as “valuations are not excessive”.
“Broadly speaking, the market can move a little bit higher. But from a tactical perspective, the market trades a little bit above where I would expect fair value is, closer to 2,400 and fading a little bit later this year.
“You’re looking at 2 percent real GDP growth environment. Two percent inflation. That means your top line of revenue growth for most companies is growing around 4 percent, maybe with 1 percent accretion or so for buybacks. You’re looking at about a 5 percent environment. That’s consistent with basically a modestly increasing market as you look into 2018 and 2019,” he said.
“If you have a group of stocks that’s going to grow 10, 15, 20 percent in terms of revenues — Google, Apple [and] Amazon where they trade at three, four, five times enterprise value to sales — that’s the sweet spot to look for,” he added.
Apple shares are currently trading down 2.34 percent in pre-market trading, at 145.50 (1320GMT).