Apple downgrade

[mattp...@gmail.com]

Apple's Surprising Downgrade Parade
Posted By:Jim Goldman
Topics:Earnings | Wireless Communications | Information Technology |
Technology
Sectors:Software and Computer Services | Software | Telecommunications
| Technology
Companies:Research in Motion Limited | Apple Inc

CNBC.com
It's not often--like almost never--that you see a downgrade parade
like the one for Apple this morning, that doesn't follow earnings or
some kind of catalyst.

But such is the case today for Apple [AAPL 109.11 -19.13
(-14.92%) ], from the likes of RBC Capital , Morgan Stanley and
Barclays (though Barclays merely reinitiated with a lower price
target.) Morgan Stanley took its target from $178 to $115. RBC went
from $200 to $140.

So why now, why all of a sudden and why so much pessimism around these
shares?

Well, first things first: fundamentals be damned. I don't think this
is necessarily about what Apple itself might be doing wrong. It seems
to be far more "macro" than "micro." I spoke to one analyst this
morning who says the economy is such a mess right now with so much
concern about the consumer, that a year from now no one wants to look
back and say "how could you have possibly missed that?" Whether Apple
products are still selling well or not.

Research in Motion's [RIMM 66.49 -4.27 (-6.03%) ] lousy numbers
and outlook spooked the Street last week, no question. Even if there
were strong suggestions that the company's problems stemmed from
competition with Apple and not because of some weakness in the market
place. And because of RIM's numbers, there's also concern about
margin's coming down, even though Piper Jaffray, a long-time Apple
bull, says that Apple's insistence of 30 percent is in place merely to
keep Wall Street's expectations in line.

If that's the case, that strategy might be backfiring. Oh, and there's
also concern about multiple compression. Well, duh! Remember that
RIM's numbers would only be a harbinger (maybe) of Apple's smart phone
business. Unlike RIM--and this is so important--Apple's got those
other two legs supporting the table in Mac and iPod. In other words,
RIM hardly provides a peak at what to expect from the far more
diversified Apple.

o
Apple faces iTunes test case in Norway
o
RIM Wobbles And You Respond
o
Apple IS the Issue at RIM

To that end, NPD, Piper and some other market research are all still
projecting 5 percent upside to Street numbers for both Macs and iPods.
The company has $21 billion in cash in the bank. The "platform" is
being adopted. Again, fundamentals be damned.

I suspect that if Apple misses its numbers in a few weeks, this
analysis this morning will look pretty spot on. But if Apple blows
through those expectations, and beats, these analysts can seek cover
under the guise that these concerns today, mirroring the macro-
economic condition, could gain a foothold at any time over the next
year or so and they thought that now would be a good time to sound the
alarm bell.

Trouble is, this kind of the thing tends to become a self-fulfilling
prophecy, which means this analysis--any analysis--can't be wrong.
Even if it might be. And that's a rough place for investors to be if
they're trying to, well, invest.

Sure, you can insist as much as you want that you're not drunk, but if
five or six of your friends tell you you're drunk, you're probably
drunk. I don't think that's what's happening here. I think instead
these reports are suggesting that Apple "might" be drunk, "could
become" drunk.

Anything's possible, I suppose. Investors, however, ought to focus
instead on what's probable. Analysts might want to try that as well.

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