This is a rating that has stunned the investment community.
The Apple Inc. (NASDAQ:AAPL) stock has been downgraded to Avoid by TownHall Investment Research analyst Jamie Townsend.
Townsend said that after five bullish years he was downgrading the stock as the company would be unable to sustain its current pace of growth and would slow down.
“Trees do not grow to the sky and all of the great technology growth stories of the last 25 years have eventually experienced slowing momentum,” he wrote in a research note.
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“We now expect that same phenomena to affect Apple over the next 12 months and to be greater than investors are expecting. This rating reduction does not reflect concern over Apple’s ability to perform in either its September or December quarters. Instead, it is driven by a growing unease on our part as to the company’s longer-term ability to continue to drive its success in wireless markets. We believe that our readers should look to potential share strength in the remainder of 2012, as an opportunity to begin reducing the size of positions.”
Some of the factors which drive Apple's growth such as opportunities in wireless markets, innovations, potential of the smartphone segment and gains in market share were had started to fade and this would gain momentum as time went on.
In the area of innovation especially Apple had failed to live up to its potential as the recent iPhone 5 had shown. Also smartphone growth was approaching a fatigue state and had already started to show signs of slowing down.
Customer loyalty was still strong for Apple but the share performance was likely to be affected next year due to its diversity and depth of ownership.