Citi Downgrades Apple (AAPL) to Neutral; Recent iPhone Order Cut Brings Demand into Question

December 17, 2012 6:37 AM EST
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Citi downgraded Apple (NASDAQ: AAPL) from Buy to Neutral, lowering its price target from $675 down to $575.

The firm cautioned on slowing iPhone demand with the latest iPhone 5 launch in 40 new markets receiving mixed results. Analyst Glen Yeung said, "...near-term supply chain order cuts, while inconclusive in nature, bring into question the strength of iPhone5 and refocus investors onto risks in the Apple story. As such, we see the likelihood of any near-term rally as diminished..."

The analyst noted that Apple's reduction in orders might be a supply & demand issue. Citi's checks indicate that, "Apple has seen a 45-50% increase in monthly iPhone5 production output October to December. While some of this increase was anticipated, our discussions with various points in the supply chain indicate yield improved faster-than-expected. Given that Apple would likely double order in periods of low-yield, order cuts as yields improve seem reasonable."

Citi sees the demand environment as "good, not great." Pre-orders at China Unicom (NYSE: CHU) appeared to be strong (300,000 for the iPhone 5 versus 200,000 for the 4S), but pre-orders in Taiwan were less so (350,000 versus 380,000).

Finally, Citi noted increasing competition, saying, "...when also considering strength at Samsung is still evident from our supply chain checks, we suspect competition is improving, diminishing the hype around the iPhone 5."

On Sunday, Apple said that iPhone 5 sales in China topped two million units in the first weekend of availability. For more color, click here.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $509.79 yesterday.

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jim on 2012-12-17 18:44:51
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where was this clown from citi at 700, 650, 600, 550? must ba a bottom at 500. the stupidity of wall street anal asis is incredible.

Anton on 2012-12-17 14:57:05
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Citi's Glen Yeung started coverage 11/26 with a buy; this is an abrupt turnaround and a big $100 cut in target price! He sings a much different tune in less than 1 month

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