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“How much worse does it get for Apple stock? Probably not a lot.”

From Top 10 Stock Picks for 2019 ($)

The shares are down more than 20%, to $171, in the wake of a disappointing earnings report for the September quarter. Wall Street has reacted to weak guidance for the current quarter, production cutbacks at iPhone suppliers, and the company’s move to stop disclosing unit sales of iPhone, iPad, and Mac devices—an indication that critical iPhone sales may be headed lower.

The stock is finding support because its valuation looks attractive and there appears to be limited risk to current-year earnings even if one assumes a 5% to 10% decline in iPhone sales. Apple now trades for 13 times projected earnings of $13.30 a share in its fiscal year ending in September. The P/E ratio is about 11 when Apple’s $25 a share in net cash is stripped out.

“It is difficult to see earnings declining below fiscal-year 2018 levels of $11.91, due to strong year-over-year contributions from services, wearables, and buybacks,” Bernstein analyst Toni Sacconaghi wrote recently. And Piper Jaffray analyst Michael Olson wrote last week that “international iPhone weakness and disappointment over future unit disclosure are largely baked into the stock.” He maintained an Overweight rating but cut his price target to $222 from $250.

 Apple’s high-margin services revenues—including App Store, Apple Music, and Apple Care—rose 24% in the latest year, to $37 billion, and are on track to hit $50 billion by 2020. In Barron’s cover story last week, we suggested that the company could package some of its services, or iPhones and services, into an attractive monthly subscription service.

One big buyer of the stock in the coming year will be Apple itself. It has the world’s largest repurchase program and is expected to buy back about $70 billion of shares in the current fiscal year, or 8% of those outstanding. Investors also get a 1.8% yield.

My take: “Disappointing earnings report for the September quarter”? May I remind Barron’s of Apple’s results for fiscal Q4 2018:

• Revenues up 20%
• iPhone units flat
• iPhone ASPs up 29%
• EPS up 41%
• Services up 17%
• China revenue up 16%

Today’s full list of Barron’s picks, in alphabetical order: Alphabet, Apple, Bank of America, BlackRock, Caterpillar, Chevron, Daimler, Delta Air Lines, Energy Transfer and Toll Brothers.