Apple Downgraded Over Moral Concerns. Cantor Says Suppliers Had A Better Than Normal December

Jan 6 2014, 1:01pm CST | by

Apple Downgraded Over Moral Concerns. Cantor Says Suppliers Had A Better Than Normal December
Photo Credit: Forbes Business

Apple was downgraded from Hold to Sell by Standpoint Research based on moral reasons revolving around how much Apple’s suppliers pay their employees. On the other had Brian White, Cantor Fitzgerald’s Apple analyst, says his preliminary Apple Barometer which tracks the company’s suppliers had a better than normal December. (Note that my family and I own Apple shares).

One of the few times I have seen moral reasons for a downgrade

Standpoint Research analyst Ronnie Moas wrote “For Apple Computers to pay their workers $2 an hour while they have $150 billion in the bank is nothing short of obscene. They have workers who are doing back-breaking and eye-burning work in depressed states of mind and in many instances have already committed suicide. Instead of treating their employees like human beings, they are treated like animals. If it were not for their employees, Apple would not be where it is today. But instead of giving these people a better life, they give these people the bare minimum and defend this action with the argument that the wage is higher than the average there and in-line with what their competitors are paying.”

While it is commendable for one to stick to their beliefs I don’t think it will have much of an affect on investors buying or holding the shares.

Note that on August 2 last year Standpoint downgraded Apple (price of $462) from Buy to Hold due to the company not finishing off any of its competitors and that its market cap would trend back towards $300 billion (about a $333 stock price).

Standpoint wrote, “Back in September 2012 the share price hit $700. It looked as though they were going to knock out their competitors and maybe justify that share price and market capitalization. The problem is that they knocked a few competitors down … BBRY, NOK, HPQ, DELL, Samsung … but never knocked anyone out … big difference…My guess is that Apple eventually will come back towards the pack ($300 billion) as opposed to separating itself further from the pack. $700/share last year was probably as good as it will ever get for Apple. There was an over-reaction in April when shares dropped below $400 and I got what I was looking for … a 15%-20% bounce off that over-reaction low point.”

Preliminary Apple Barometer saw sales rise more than 2x the average

Over the past 8 years the Apple suppliers that White tracks have seen sales rise 13% from the September quarter to the December quarter. With over 95% of the sales now reported for the month of December he estimates that there was a 31% increase this year for the quarter and that this will be the second best quarterly performance of the past nine years.

In early December White estimated that if the suppliers had their typical 10% month over month growth then the quarter would grow 28% vs. the previous one. For the quarter he is projecting Apple to generate revenue of $58.6 billion and EPS of $14.31 vs. the Street at $57.3 billion and $14.05, respectively.

The stock has bounced back nicely today

The stock had closed just above its 50 day moving average of $539.72 on Friday. Initially this morning it was down almost $7 and hit a low of $533.60 before bouncing back to positive territory. If the stock closes at $540 or above that would be a positive test of the 50 day moving average.

Source: StockCharts.com

Follow me on Twitter @sandhillinsight. You can find my other Forbes posts here.

Source: Forbes Business

 
 

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