Analyst Downgrades Apple on Hon Hai Slowdown

Analyst Alex Gauna of JMP Securities issued a downgrade on Apple Inc. Wednesday, a downgrade based on slowing growth at one of Apple’s primary manufacturers, Hon Hai Precision Industry Co. The analyst dropped Apple from “Market Outperform” to “Market Perform,” according to a report from The Los Angeles Times.

At issue is reported growth from Hon Hai Precision, which owns Foxconn, one of Apple’s largest manufacturers. Mr. Gauna told clients in a research note that Hon Hai Precision reported growth of 84% in December, 37% in January, and 24% in February.

The implication is that this slowdown in growth must reflect a slowdown in Apple’s own growth, and Apple’s phenomenal growth is one of the fundamental factors behind the growth of Apple’s stock, which had been up 10% since the beginning of 2011, but has given much of those gains back in the last two days of trading. Of course, Apple isn’t Hon Hai Precision’s only customer, but Apple is certainly one of the largest of those customers, or at least of the Foxconn subsidiary.

Accordingly, make of this downgrade what you will, but the markets seemed to take it as an excuse to sell off shares of the company, which closed at US$330.01, down $15.42 (-4.46%), on heavy volume of 41.2 million shares trading hands.

As The Mac Observer reported earlier on Wednesday, however, the markets as a whole experienced a broad selloff due to concerns about Japan’s earthquake/tsunami/nuclear power plant situation.

Speaking of Japan, Mr. Gauna also warned his clients that Apple’s supply chain could face disruptions from problems in Japan.

AAPL Chart

Source: Yahoo! Finance

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