Zacks Investment Research downgraded shares of Apple Inc. (AAPL) from NEUTRAL to UNDERPERFORM on June 07, 2013, with a target price of $399.00.
Apple's second quarter revenues and earnings missed the Zacks Consensus Estimate. Though revenues improved on a year-over-year basis, the company witnessed margin contraction due to unfavorable product mix and increase in operating expenses as a percentage of revenues. Nonetheless, we believe that Apple is well positioned to gain over the long term from international expansion, upcoming product launches and recent shareholder friendly moves. However, lack of innovative products, increasing competition in most of its operating markets, declining margins and legal headwinds are the major concerns going forward. The recent ITC ruling that favored Samsung in a patent infringement case makes us further cautious on Apple. Thus, we downgrade our recommendation from Neutral to Underperform and set a price target of $399.00.
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