Apple Inc. (NASDAQ:AAPL) shares are not doing well. The firm’s shares are currently down a fraction on today’s trading, and the company’s stock has lost more than 15% since the start of 2013. Today a new report on the company from Needam & Co., authored by Charlie Wolf, put a twelve month price target of $710 on the stock. That’s a reduction from the previous target of $750. Are analysts delusional about the tech company?

apple stock

The ideas you assume that question implied say a lot about your relationship to Apple Inc. (NASDAQ:AAPL). Are you part of the group that thinks the company’s stock has been consistently undervalued in the last year, or do you think that the firm has seen its best days, and will never again see its price above $700?

Needam & Co. Charlie Wolf is obviously part of the first group, though he is toning down his expectations. His price target implies an increase of more than 58% in the company’s stock in the next year. His analysis relies on a sum of parts valuation of Apple Inc. (NASDAQ:AAPL). The reduced target represents the following major changes in his model.

Firstly, the value of the iPad business has been reduced. Wolf now assesses that product segment represents $11.83 per share. A similar adjustment was made to the iPhone business. According to the analyst, that product is now worth $14.56 per share. Both downgrades are the result of an expected margin compression, and a reduction in the expected iPhone market share from 22% to 20% worldwide.

iPad cannibalization has had a largely negative effect on Mac sales, according to the report. Wolf reduced his estimate for the value of the Mac business by 42%. Apple Inc. (NASDAQ:AAPL) missed the sales estimate for Macs in the last quarter by a wide margin. The new valuation of the segment reflects a faster than expected contraction in the market.

Apple Inc. (NASDAQ:AAPL) shares are in a slump. Analysts are still, on the whole, looking for the company to increase in value by 40-60% in the coming year. At a price earnings ratio of 10 that seems do-able, though it also seems as if the company’s shares shouldn’t have fallen so far in the first place. If the market were consistent with simple ratios, everyone would be rich.

One thing is certain, if China implodes, and today’s news make it seem it will, Apple Inc. (NASDAQ:AAPL) will fall hard. That may be the major indicator for the company in the year ahead.

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