TSC Ratings' Updates: Apple

The following ratings changes were generated on Thursday, Nov. 13.

We've downgraded Apple (AAPL Quote) from buy to hold. Strengths include its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. Weaknesses include a generally disappointing performance in the stock itself, premium valuation and disappointing return on equity.

Revenue rose by 27% since the same quarter one year ago, outpacing the industry average growth rate of 18.6% and boosting earnings per share. Apple has no debt to speak of and a quick ratio of 2.07, which demonstrates the ability of the company to cover short-term liquidity needs. Shares have plunged 41.39% on the year, apparently dragged down in part by the decline in the S&P 500. Don't assume, however, that the stock can now be tagged as cheap and attractive. Based on its current price in relation to its earnings, Apple is still more expensive than most of the other companies in its industry.

We've downgraded Estee Lauder (EL Quote) from buy to hold. Strengths include its revenue growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. Weaknesses include weak operating cash flow and disappointing return on equity.

Revenue rose by 11.3% since the same quarter a year ago, underperforming the industry average growth rate of 16.6% but boosting EPS. At 76.8%, Estee Lauder's gross profit margin is very high, having increased from the same quarter last year. Its net profit margin of 2.7%, however, trails the industry average.