Needham Downgrades Apple...To Buy

Analyst downgrades are never good news for shareholders, but some are worse than others.

Apple Inc AAPL just got the kind of downgrade that all shareholders are hoping for. With shares up 22 percent in 2017, Needham analyst Laura Martin downgraded Apple's stock from Strong Buy to Buy, as the stock has now risen to within 6 percent of the firm’s previous $150 price target.

Along with the downgrade, Needham set a new target of $165.

Related Link: Snap's Fortunes May Be Tied To Apple And Vodaphone

Martin uses the acronym RAPID to explain the five reasons why Apple remains a top stock pick for Needham:

• Recurring revenue streams
• Arms dealer in a rising tide
• Pure play on secular mobile growth market
• Inexpensive based on relative margins, asset efficiency and stock valuation
• Downside protection due to excess cash, dividends and share repurchases

The arms dealer analogy refers to Apple’s App Store.

“AAPL takes 15-30% of any revenue from every app on their devices and is immune to customer fatigue tied to any single app,” Martin explains.

From a valuation perspective, Martin concludes Apple is much more profitable on a per-share basis than content companies like Walt Disney Co DIS and CBS Corporation CBS and more asset-efficient than internet companies Facebook Inc FB and Expedia Inc EXPE.

Apple's 22 percent year-to-date gain makes it the top-performing stock among the Dow Jones Industrials by about 8 percent.