A rare Wall Street downgrade stoked fears that Apple Inc's torrid pace of growth is slowing, sending shares in the world's largest technology company sliding for the second straight day.
Apple lost about $13 billion of value in Wednesday trade after JMP Securities' Alex Gauna downgraded the stock, citing also uncertainty about how the aftermath of the largest earthquake to hit Japan -- which accounts for 6 percent of Apple's sales and is a major source of electronic components -- will affect it.
Apple shares were down 4.8 percent to $328.44 in busy afternoon trade, following a 2.3 percent slide on Tuesday.
Apple, which last week launched its iPad 2 tablet to crowds of fans outside its stores, has now lost close to $19 billion in value over two days.
Gauna downgraded Apple to market perform from market outperform, based on signs of a severe slowdown in sales growth at Hon Hai Precision Industry Co Ltd, a contract manufacturer which is heavily reliant on Apple's business.
He is among just five of 54 analysts on Thomson Reuters I/B/E/S with a sell, hold or neutral rating on the stock, a perennial market darling and mainstay of global portfolios.
The shares are up nearly 70 percent since the start of 2010. Apple declined to comment on the recent decline.
There's a risk of complacency. The sell-side has gotten itself into a game on one-upmanship, Gauna said. Investors should make sure that they're comfortable with the situation ... especially since there's just so much uncertainty right now.
He added: We know that Japan as a supplier matters.
Japan is a major source of glass for displays used in smartphones and tablets and is home to around a fifth of the world's semiconductor production. Japanese factories producing everything from chips to car parts have closed following the earthquake and tsunami last Friday, threatening supplies to manufacturers across the globe.
JMP said sales growth in Hon Hai slowed from 84 percent year-over-year in December to 37 percent in January and 26 percent in February.
The causes for this could include competition for the iPhone from smartphones based on Google's Android, weakness in computing products as tablet demand grows, and product transition risks around the iPad 2, the brokerage wrote.
Apple and Hon Hai sales growth was tightly coupled throughout 2010, and given Apple's scale, we view it as unlikely that a correlation isn't still in effect as Hon Hai slows, Gauna said.
In an apparent response to Gauna's report, Oppenheimer analyst Yair Reiner said Apple's contribution to Hon Hai's revenue was limited.
The correlation between Apple and Hon Hai's revenue therefore appears to be a product of coincidence more than causality, Reiner, who has an outperform rating on Apple, said in a note to clients.
BACK TO EARTH
Wall Street is accustomed to Apple blowing its own sales estimates out of the water. But Gauna warned that major technology companies' shares have been punished more severely of late for missing financial estimates.
Nervous analysts have worried for years that the stellar stock prices of technology giants like Apple could tumble back to earth, especially as competition intensifies for its hottest products, from the iPhone to the iPad. The tablet is expected to have sold 1 million units since its Friday launch.
Some top hedge fund managers cut their stakes in both Apple and Google Inc in the fourth quarter, according to a Thomson Reuters survey of filings of the Smart Money 30, some of the largest stock-picking equity hedge funds.
Japan is a key consumer market for Apple, but BTIG analyst Walter Piecyk said demand for the iPad 2 is likely so strong that any tablets that go unsold there will easily be bought up by customers elsewhere.
The past weekend showed once again why Apple is putting up more than 50 percent growth. Lines for the iPad 2 extended longer than even for the iPhone 4 when it was launched, he said.
(Additional reporting by Jennifer Robin Raj in Bangalore; Editing by Gerald E. McCormick and John Wallace)