Apple Downgraded By Wells Fargo Due to Gross Margin Concerns

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A major research analyst has kicked off the new year by tempering his bullish thesis on Apple (NASDAQ:AAPL). Wells Fargo’s Maynard Um has downgraded Apple shares from an Outperform rating to a Market Perform rating based on gross margin pressure concerns, per a note seen by Wall St. Cheat Sheet.

“Our bullish thesis on Apple had been predicated on the expectation for gross margin [GM] expansion driven by the 5s cycle,” wrote Um in a note to investors. “While we still have conviction in the gross margin thesis (and the potential for iPad/iPhone unit upside), we believe this may be largely embedded into the valuation.”

On the “positive catalyst side,” Um noted that he still expected several new products from Apple in 2014, including the iPhone 6, the iWatch, and new developments in the use of iBeacon technology. However, despite the acquisition of PrimeSense in 2013 and the many supply chain rumors about an upcoming Apple television product, Um doesn’t believe consumers will see the launch of a television or improved Apple TV product until 2015.

Um also noted that sales of the iPad mini, iPad Air, and iPhone models “appeared to be strong” over the holiday shopping period. The Wells Fargo analyst predicted that 24 million iPads and 54.8 million iPhones had been sold in the December quarter.

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