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Sometimes analysts make contrarian comments and they turn out to be right. Others do it and are dead wrong.
The fate of Alex Gauna has yet to be decided. Who’s that? He’s the brave analyst at JMP Securities who had the audacity and unmitigated gall to downgrade Apple to market perform.
How rare is a downgrade for the seemingly unassailable tech juggernaut? You have to go back to October of last year to find the last one. That’s when Scotia Capital cut Apple to sector perform. And almost a year before that, Needham and Company felt the need to reduce the stock from strong buy to buy.
Gauna’s reasoning is that Apple’s main manufacturer, Hon Hai Precision of Taiwan, has seen its year-over-year sales growth decline from 84 percent in December to 26 percent in February. The analyst has no concrete evidence Apple is giving Hon Hai less work but speculates the sales drop may be a result of increased competition for the iPhone. He also thinks Apple’s computer demand may be sagging as it cannibalizes itself with strong sales of the iPad.
Gauna’s also contends that markets may have become complacent by expecting Apple to continue to blow the doors off earnings estimates. The company has consistently surpassed expectations the last five years by an average of 23 percent.
The JMP Securities analyst stresses he has no problems with Apple’s long-term fundamentals.
If Apple happens to miss FQ2 earnings estimates, Gauna will have made a name for himself. If not, it’s back to obscurity.