The Ratings Game: Apple shares slide as AmTech analyst cuts rating to ‘Neutral’

Apple Online Store“While much of the tech sector has struggled during the last quarter, Apple Inc. has seen its shares quietly rise more than 45% over the last two months as anticipation grows over the company’s second fiscal quarter earnings report, which is due Wednesday,” Rex Crum reports for MarketWatch.

“The run-up was enough for American Technology Research analyst Shaw Wu, who cut his rating on Apple’s stock to neutral Tuesday morning after holding a bullish view on the shares for nearly three years,” Crum reports

“‘This was a very tough decision as we have been bullish on Apple for the past several years,’ Wu wrote in a note to clients, adding that the stock has more than tripled in that time,” Crum reports. “The move seemed to cool some of the enthusiasm around the stock. Shares of Apple slid more than 5% by midday.”

“In his report, Wu said he believes Apple will beat Wall Street analysts’ estimates of a profit of $1.07 a share on $6.97 billion in sales for the quarter. Wu actually expects Apple to earn between $1.25 and $1.30 a share on revenue between $7.1 billion and $7.2 billion,” Crum reports. “Driving the quarter will be strong sales of Macintosh computers while iPhone sales could also be better than expected, Wu said. He also expects sales of 10 million iPods, which is roughly in line with most other estimates. But he believes expectations have gotten to high for Apple’s shares to have additional upside.”

“Wu’s call stands out on Wall Street, where the vast majority of analysts covering Apple retain bullish views on the stock,” Crum reports. “Out of 29 analysts covering Apple, 24 rate the shares as a buy while only four – including Wu – carry neutral ratings, according to data from Thomson Financial. One broker maintains a sell call on the shares.”

MacDailyNews Note: Please see: Morgan Keegan downgrades Apple to ‘underperform’ – April 08, 2008

“Wu believes that the risk and reward benefit from the stock is ‘not that compelling’ anymore,” Crum reports. “‘[The] shares are no longer inexpensive,’ Wu said.”

More in the full article here.

21 Comments

  1. Folks, take a deep breath and read it again. The argument is that “Apple mania” has pushed the stock so high anything short of Apple announcing a trillion dollars in profit and billion iPhones sold is going to come off as a disappointment. Even Apple can have expectations set impossibly high. This isn’t about Apple’s success — no one debates that — it’s about where the stock is headed.

    In other words, the stock will probably drop after the earnings report. Which, historically, has been true, hasn’t it?

    ——RM

  2. Read the words carefully. Understanding the nuance is critical.

    Traders make money by trading. The shares have risen to a point whereby the potential trading gain to be derived against the 12 month target does not represent as compelling a value as when the price was significantly less.

    The shares move in predictable amounts in four distinct cycles each year. Learn. Put your capital to work. Double your money or better every year. No whining please, tremendous wealth being created here.

  3. Bah humbug to analysts. Apple will beat their Q2 guidance, but analysts will say they didn’t beat it by enough. Then, when Apple sets a conservative guidance for Q3, they’ll say that they didn’t set their guidance high enough. Ya can’t have both, folks. Either Apple sets achievable goals and beats them, although perhaps not astoundingly so, or they set unachievable goals. Which would you prefer? Stupid analysts. They need to go away.

  4. I’d like to see the SEC put the breaks on all analyst public predictions for a 12 month trial period (then maybe make it permanent after that). If an analyst makes a statement or prediction that is made public then the analyst will be made personally liable for any and all investor losses.

    After 12 months the SEC can evaluate the market stability and determine how much of the market is driven and manipulated by the analyst for their company and personal profits and the profits of their clients.

  5. a story for WU

    two masters living across a river from on another for many years.One morning one wakes up and stretches and shouts “my gung fu is so strong the 8 winds of heaven could not budge me one inch!
    The other master says ” your out of your mind your nothing but an old fart!”
    the first master runs over the bridge with his sword and chases the other master from pillar to post finally cornering him and getting ready to strike
    The second master looks at him and says ” So the 8 winds of heaven could not move you one inch but one fart blew you over the river!”

    Get the message WU?

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