Why Apple Shares Slipped

Why Apple Shares Slipped

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Apple slipped 1% this morning after Wells Fargo downgraded the consumer electronics gorilla from outperform to market perform.

So what: Along with the downgrade, analyst Maynard Um maintained his valuation range of $536-$581, bracketing the current stock price of $561. While momentum traders might be attracted to Apple's share-price climb in recent months, Um believes much of the bull case is already baked into the valuation.

Now what: Wells sees the possibility of continued pressure on gross margin, as well as a tighter market opportunity for Apple going forward. "Gross margins have decreased by an average of 225 basis points (bps) in the period following the launch of new form factor iPhones while increasing [nearly] 225bps in the two quarters following an 's' launch," noted Wells. "With the secular story, in our opinion, largely over, we believe the stock may be more susceptible to trend with margins." When you couple those competitive headwinds with the stock's solid rebound since late June, waiting for a wider margin of safety seems prudent.

Our top pick for 2014
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

The article Why Apple Shares Slipped originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Originally published