Was Raymond James Justified In Downgrading Apple?

Apple Inc. (NASDAQ: AAPL) took it on the chin last night and also today based upon the company’s very rare earnings and revenue shortfall.  While the stock got crushed, we want to know if the downgrade today from Raymond James was justified or not. The new rating is still Outperform, but it was previously a Strong Buy.  More importantly, the price target on Apple was cut down to $730 from $800 in the call.

This was the second miss in about 5 years.  The miss was by enough that it makes you wonder if the ghost of Steve Jobs just leaves too large of shoes to fill.  Raymond James has the same feeling as the rest of us: the miss was due to customers waiting for the iPhone 5 this fall.

Another issue brought up by Raymond James was flat trends in Europe.  With all of the uncertainty over there, can it really be that much of a shock?  Apple is now generating more than 60% of its sales internationally and that implies much currency risk outside of the U.S. and China.

For a stock to drop 4% after earnings is not unusual.  But when you hear the 4% drop explained as being almost $25 per share the drop sounds massive.  With shares down 4% around $576, the 52-week range is $353.02 to $644.00.  If the $730 target is eventually hit then Apple holders still have 26% upside ahead.

Rival analyst Gene Munster of Piper Jaffray pointed out that buying Apple on the big post-earnings dips has generated high profits for investors.

JON C. OGG