Tech Stock on Watch; a Green Apple is better than a Red Apple

Shares of Apple Inc. (NASDAQ: AAPL) inched into the green this morning, gaining nearly 1% at $336; AAPL opened the week at $356.48, dipping as low as $326.32 Thursday before making slight gains today.

Shares of the tech giant also took a hit with a downgrade by JMP Securities analyst Alex Gauna to Market Perform. The downgrade is the first ever for Apple since last October. Despite the downgrade from JMP, 90% of the brokerages covering Apple have a Buy rating on the company. The rating downgrade from JMP resulted in a sharp drop in Apple shares, which were already seeing some pressure due to the sell-off in the broad market following the events in Japan.

The rare downgrade for Apple shares came on indication of some relative sales weakness in some of the Cupertino, California-based company�s products.

In his research note, Gauna cited the latest results from Hon Hai Precision Industry, which is the owner of Foxconn, Apple�s major manufacturing partner. Gauna noted Hon Hai�s sales slowed from an 84% year-over-year growth in the month of December to 37% in January and 26% in February. Gauna said that the possible causes for the slowdown in sales at Hon Hain could include simply in-line iPhone sales due to more significant Android competition, weakness in computing products as tablet demand grows, and or product transition around the iPad 2.

In the longer term, AAPL�s growth story is an impressive one. The company’s revenue and EPS grew an average 36% and 58% a year over the last five years, respectively. �The company earned $15.15 a share on revenue of $65.2 billion in fiscal 2010, compared to $9.08 a share on revenue of $42.9 billion in fiscal 2009. The company�s stock price increased 5-fold over the last five years to became the second-largest company in the United States.

The company really kicked it in gear in the first quarter of fiscal 2011, with growth rates exceeding historical levels and analyst expectations. For the last reporting quarter, Q1 FY2011, ended December 25, 2010, AAPL�s revenue rose 71% to a record of $26.7 billion, much better than analyst consensus� forecast for revenue of $24.4 billion. Previously, for Q4 FY2010, the company�s revenue jumped 67%. AAPL reported earnings of $6 billion for Q1 FY2011, or $6.43 cents a share, up 78% from a year-ago net profit of $3.4 billion, or $3.67 a share. Analysts on average were expecting a profit of $5.40 a share, according to Thomson Reuters.

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