by , 1:50 PM EDT, April 14th, 2005

American Technology Research (ATR) analyst Shaw Wu downgraded Apple Computer to a 'Hold' Thursday morning. While acknowledging Apple Computer's fundamental strength, Mr. Wu told his clients that Apple's slowing top-line growth, or revenue growth, and the high expectations that investors have had for the company give him concern going forward.

Mr. Wu's comment emphasized investor expectations in his comments, saying that, "While AAPL upsided its EPS guidance by 14 cents and revenue by over US$300 million, we believe that investors are not satisfied with these results and may have baked future big upside expectations into AAPL's stock price."

He also said that year over year growth could slow to 12-15% in fiscal '06, which is much slower than the 70% from the current quarter.

"As a result," Mr. Wu wrote, "we believe AAPL's trading multiple may compress."

Product availability for Apple's hottest products -- including iPod, iPod mini, iPod shuffle, and Mac mini -- has also been improving, according to retail spot checks ATR has conducted. Mr. Wu said this could be attributable to increased production on Apple's part, but that he thinks it is actually slowing growth.

The key thing about Mr. Wu's comments concerning top-line growth is that he sees the rate of growth slowing, as opposed to projecting decreases in Apple's product sales. This is important because much of Apple's gains during the last 12 months have come from the sharp increases in Apple's sales. Even with that increase in sales, however, the company's price to earnings ratio (P/E) was still higher than other tech companies as investors looked for Apple to continue to have those sharp increases.

What Mr. Wu said, and indeed Apple executive themselves said in Wednesday's conference call, that company sales growth may be flattening, which detracts from forward-looking P/E gains already built into the stock.

Mr. Wu recommends on 'Hold' on the stock.

Apple's stock has been hit hard Thursday by a massive sell-off. In early afternoon trading, Apple was trading at $37.40 a share, down $3.64, or 8.87%, on strong volume of almost 70 million shares trading hands.

*In the interest of full disclosure, the author holds a small share in APPL stock that was not an influence in the creation of this article. �