UPDATE: Berenberg Downgrades Apple (AAPL) from Buy to Sell, Smartphone Investment Dead

March 6, 2013 7:41 AM EST
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(Updated - March 6, 2013 8:59 AM EST)

Berenberg downgraded Apple (NASDAQ: AAPL) from Buy to Sell. Analyst Adnaan Ahmad said that smartphone investment is dead. The analyst also cut his rating on Samsung.

"The smartphone investment of the past three years is now a smartphone trade. This is very similar to what happened in the handset industry a decade ago, when volumes topped out in developed markets and were led by growth in emerging markets," said Ahmad.

Ahmad said he expects Apple's margins to decline from 45-50 percent to 35 percent in the next three years.

"Apple and Samsung margins are peaking and growth is going to be driven by the margin-dilutive mid-to-low-end segment in the next 24 months. In our opinion, this will translate into poorer industry fundamentals," concluded the analyst.

Ahmad also thinks lower margins will eventually hurt profitability in the supply chain.

"Given our concerns about industry profitability in the smartphone segment, we think smartphone vendors will look to the supply chain to reduce costs further. We add Hon Hai and Catcher to our Sell-rated supply chain list that includes Imagination, Qualcomm (Nasdaq: QCOM), Foxconn Technology, Foxconn International, Mediatek and TPK," added the analyst.

For an analyst ratings summary and ratings history on Apple (NASDAQ: AAPL) click here. For more ratings news on Apple click here.

Shares of Apple closed at $431.14 yesterday.

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