Sept. 29 (Bloomberg) -- Apple Inc., the best-performing technology stock last year, dropped the most in eight years in Nasdaq trading after a Morgan Stanley analyst said price cuts will curb profit growth.

Analyst Kathryn Huberty in New York lowered her estimate on the stock by 35 percent today, to $115 from a previous target of $178. The shares fell $22.98, or 18 percent, to $105.26 at 4 p.m. New York time on the Nasdaq Stock Market, the biggest loss since Sept. 29, 2000. They are down 47 percent this year.

Apple, which gained last year on rising sales of the Macintosh computer and optimism for its iPhone handsets, will be hurt by slowing orders, Huberty wrote in a report. Cupertino, California-based Apple will have to cut prices to compete this holiday season, weighing on earnings per share, she said.

``Even in the best of scenarios, Apple's EPS growth will decelerate meaningfully from June quarter levels,'' Huberty wrote. ``Multiples for high growth stocks will continue to compress in the current environment.''

In the broader market, the Standard & Poor's 500 Index plunged the most since Oct. 19, 1987, after U.S. lawmakers failed to approve the Bush administration's $700 billion financial industry bailout. Google Inc. dropped below $400 for the first time since September 2006.

Huberty reduced her rating on Apple shares to ``equal- weight'' from ``overweight.'' RBC Capital Markets also cut its rating on Apple today to ``sector perform'' from ``outperform.''

Jobs's Plan

Chief Executive Officer Steve Jobs used promotions to win personal-computer sales in the back-to-school shopping season and poured money into new product development. This month, he introduced slimmer iPod media players and cut the price on the touch-screen model 23 percent, appealing to cost-conscious consumers before the holiday shopping season.

Apple may have further to go. The company needs to move away from products that cost more than $1,500 as consumers lean toward lower-priced PCs, Huberty said.

She lowered her fourth-quarter profit estimate by 12 cents to $1.62 a share and cut her sales projections to $10.7 billion from $11 billion.

In July, Apple's forecast for the back-to-school season missed analysts' estimates. Officials said promotions and product development would curb profit margins, disappointing investors after the company posted a quarter with record sales of Macs and iPhones and benefited from stronger-than-anticipated demand for iPod media players.

Apple has predicted a gross margin, the percentage of sales left after deducting production costs, of 31.4 percent in the quarter, down from the 34.2 percent in the third quarter.

Jobs has relied on iPods to spur holiday demand in what is typically Apple's biggest period for sales. Cheaper models may help win over U.S. consumers, who have cut budgets to cope with rising oil and food prices. A sleeker version of the 8-gigabyte iPod Touch will sell for $229, compared with $299 before.

To contact the reporter on this story: Lauren Berry in New York at Lberry4@bloomberg.net

Last Updated: September 29, 2008 16:21 EDT