A research report from JMP Securities is responsible for the damage seen in Apple Inc. (NASDAQ: AAPL) so far this Wednesday. The firm cut the rating to “Market Perform” from “Outperform” based upon weak sales at a manufacturing partner. JMP noted a deceleration at partner firm Hon Hai and the risks were actually prevalent before the crisis in Japan. The developments of the last week now amplify the concerns.
One issue being pointed out is that iPhone sales appear to be mostly in-line with expectations and the trend to tablet-PCs is probably keeping the interest out of the regular PC market for the moment. Another possibility is that Apple is merely diversifying suppliers and manufacturing partners, particularly in light of Hon Hai’s suicides being up last year.
Whatever the logic is, analyst upgrades and downgrades are not usually just one-off events. Sure, someone has to stand out and be the first to downgrade a stock. That is true even for Apple. What makes this stand out so much is that you almost never see any analyst dare to downgrade Steve Jobs and friends.
Apple shares just opened down at $341.84 after closing yesterday at $345.43.
Our own worry is not so much about iPhone and iPad sales themselves, but we are worried about the spend-up necessary to buy a Mac versus a traditional new PC or a tablet PC. Our take is that more and more consumers will enter into Apple via the iPhone and via the iPad but they may not choose to pay up for a Mac computer when they next upgrade. We did also notice that Apple this week decided to delay iPad2’s launch in Japan.
Consider this call a tentative one for now. If other analysts start to throw in the towel on Apple shares, then this call may be less controversial. Based upon the love and enthusiasm of the current spate of analysts, we would be more inclined to expect that most of the top analysts defend Apple and say that the current theme and issues from Japan may only impact one quarter.
JON C. OGG
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