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Apple Stock Gets Downgraded – Shares Drop

Apple Shares Drop

JMP Securities has downgraded Apple this morning from “market outperform to market perform.”

The reason for the downgrade that JMP states is, “A notable deceleration in its primary manufacturing partner Hon Hai.” With the deceleration of Hon Hai’s sales growth, they believe Apple’s business could follow. Hon Hai is the parent company of Foxconn, Apple’s manufacturer. JMP also believes the iPhone sales could just be in line with expectations this year, as well as seeing iPad sales replacing Mac sales.

With Apple’s track record to over-deliver, an average or slightly above average performance could negatively affect the stock, moving towards $300.

The downgrade is the first for Apple since October, when Scotia Capital and Independent Research GmbH reduced their ratings. Of the 55 analysts covering Apple, tracked by Bloomberg, 50 recommended buying shares.

Apple, based in Cupertino, California, dropped $15.42(4.5 percent) to $330.01 at 4 p.m. New York time in the Nasdaq Stock Market trading, compared with a 2 percent drop in the Standard & Poor’s 500 Index.

The slowed growth at Foxconn may signal that Apple won’t beat analysts’ estimates as much as it has in the past several years, which could lead to a stock decrease. Apple typically exceeds the estimates by 23%.

Apple released the iPad 2 on March 11, and stores across the U.S. have sold out. Waits to receive a model from Apple’s online store are taking as long as five weeks, up from less than a week when the device went on sale.

Ticonderoga White wrote a note to investors saying, “The overwhelming success of the iPad 2 launch over the past few days and another day of iPad 2 stock-outs this afternoon at Apple stores provides further evidence of the momentum Apple has in the marketplace.”

The average 12-month price target for the stock is $434.56, about 30 percent above today’s price.


Photo Courtesy of Ahmad Nawawi
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Photo Courtesy of Germeister