Apple Hits Another High, Shrugs Off Downgrade

CUPERTINO, Calif. ( TheStreet) -- Apple ( AAPL) shares hit yet another new high on Monday despite the iPhone maker being hit with a rare downgrade.

The tech giant's stock peaked at $639.83 during afternoon trading, before retreating slightly to $639.29, up 1%, on volume of 17.6 million.
Apple was downgraded by BTIG on Monday

Apple's new high, however, came hot on the heels of an analyst downgrade, with BTIG Research warning that the company's telecom partners may rein in their generous iPhone subsidies.

"We believe that investors should take a breather during the expected strength of this quarter and the rapid rise in the stock," explained BTIG analyst Walter Piecyk, citing changing dynamics in the wireless industry. "We expect post-paid wireless operators to remain firm in their plan to stunt the pace of phone upgrades in 2012 and we expect to see some initial evidence of their success in the current quarter."

The frequent upgrades of iPhone customers, according to BTIG, have squeezed wireless operator margins.

"Operators, unwilling to stall the pace of Average Revenue Per Unit (ARPU) growth, offered generous upgrade policies including some that enabled a fully subsidized phone upgrade only one year in to a two year contract," explained Piecyk. "We expect those policies to change as the faster upgrade rate of smartphones compared to legacy feature phones has been a costly surprise to post-paid and pre-paid operators."

Analyst sentiment towards Apple has been overwhelmingly positive recently, with a slew of firms raising their price targets for the tech giant. Boosted by strong first-quarter results and a successful iPad launch, Apple's stock has risen more than 57% this year, compared to the Nasdaq's more modest 17.16% increase.

Apple also sold a record 37 million iPhones during its recent fiscal first quarter, up from 16.2 million in the same period last year.

Despite its downgrade on Monday, BTIG expects a blowout second quarter from Apple, projecting revenue of $40 billion and earnings of $10.75 a share. Analysts surveyed by Thomson Reuters are looking for sales of $36.2 billion and earnings of $9.86 a share.

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"Pent up demand in China and the launch of the iPhone in 30 additional markets is likely to drive strong sales in the current quarter ," explained BTIG's Piecyk. The analyst expects Apple to sell 33 million iPhones in second quarter, but expects that number to dip to 27.5 million phones sold in the third quarter.

The Cupertino, Calif.-based firm is expected to report its fiscal second-quarter results on April 24.

-- Written by James Rogers in New York.

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