Apple shares rebound as analyst says "buy the dip"

  • Morgan Stanley’s Katy Huberty reiterates an Overweight rating and $253 target on Apple
  • Huberty says investors are overreacting to recent supplier warnings
  • Shares have dropped about 17 percent since its record high on Oct. 3

Apple shares rebounded Thursday, following a five-day slide, after Morgan Stanley analyst Katy Huberty said she believes the recent selloff is overdone, and therefore created a buying opportunity. Huberty maintains an Overweight rating on the stock with a $253 price target.

Shares have plunged 11 percent over the past five sessions, and tumbled into a bear market on Wednesday, territory marked by a decline of at least 20 percent from a stock's 52-week high. Since its record high on Oct. 3, Apple has shed about $213 billion in market cap.

The declines came as smartphone-component makers Qorvo, AMS AG, and Lumentum cut their revenue forecasts, fueling speculation that Apple is scaling back manufacturing of the iPhone.

Huberty says that the supplier warnings have just been a function of Apple's cautious outlook, so they shouldn't have hurt the stock as much as they have.

"Weaker supplier guidance reflect Apple's already more cautious Nov. 1 guidance and, importantly, doesn't impact our service growth forecast, which is tied to installed base rather than new shipments," Huberty wrote in a note to clients. "We're buyers on unit-driven pullback given services and share repurchases drive future earnings."

Ritholtz Wealth Management CEO Josh Brown owns Apple shares and, while he feels cautious on the direction of the stock, he sees the bull case Huberty is making for Apple.

"The bounce today (Thursday) is really weak given how much its come down...I don't know if its the bottom (for the stock) but the buyers are coming in where they should," Brown said on Thursday's "Halftime Report".

Kevin O'Leary, chairman of O'Shares ETFs and an investor on "Shark Tank," recently exited Apple stock after the tech giant announced it would stop revealing quarterly device unit sales. O'Leary says Huberty's analysis doesn't "change the narrative on Apple" and that not revealing unit sales numbers means Apple "doesn't want to give us the bad news."

O'Leary believes the stock will fall to $160 per share.