Is This Analyst Throwing in the Towel on Apple?

Jefferies analyst Peter Misek came down harsh on Apple (NASDAQ:AAPL) a day after the release of the company’s non-explosive earnings report for the holiday quarter, cutting his rating on the stock from Buy to Hold and chopping his price target by as much as $300.

“[The] slowdown in iPhone sales is real and material,” Misek wrote in a note to investors while bringing down his price target to $500. “While management was somewhat evasive on the call, it appears that demand in the second half of the quarter and into [first calendar quarter] was much weaker than management or we expected.”

Apple dropped almost 10 percent in after-hours trading as investors reacted to the slowed rate of revenue and earnings growth. Revenue rose 18 percent to $54.5 million from a year ago, but was below the consensus estimate of $55 million. Net earnings were $13.1 billion, or $13.81 a share, compared with $13.1 billion, or $13.87 a share, a year ago. The company did report record iPhone and iPad sales of 47.8 million and 22.9, respectively, but investors were not impressed.

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Misek joined the list of doubters, saying that Apple was losing the smartphone screen-size war and that demand was moving away from the iPhone’s 3.5- or 4-inch screens closer to devices 5-inch long and higher. He cut his current calendar year iPhone sales estimate from 191 million to 163 million and added that the company’s high margins would now stay below 39 percent and trend lower.

Samsung Threat

“Three factors are working against Apple,” Misek wrote. “[Firstly,] smartphone and tablet growth is becoming more concentrated in the low end of the market. [Then,] increased competition is leading to shorter product cycles. [And,] moving away from Samsung (SSNFL.PK), with its huge scale, high quality and excellent execution, is proving difficult and expensive.”

The analyst added that Apple’s March-quarter guidance signified the management’s recognition that the company was unlikely to “exceed expectations in the future.” Apple’s revenue guidance for the March quarter was in the range of $41 billion to $43 billion, while analysts were expecting $45.6 billion. The company did not give an EPS forecast for the period and predicted a gross margin forecast with a mid-point of 38 percent.

Don’t Miss: Your Cheat Sheet to Apple Earnings.