Analyst downgrades sink Apple, but are the bears way off target?

Apple's share price took a pounding yesterday, dropping to the lowest levels in more than a year after a pair of analyst downgrades and chaos in the capital markets. RBC Capital's Mike Abramsky dropped AAPL from "outperform" to "sector perform" and Morgan Stanley's Kathryn Huberty dropped Apple from "overweight" to "equal-weight". Apple fell $22.98 or 17.9 percent to $105.26, after briefly flirting with the $100 mark.

But was the huge sell-off necessary? Yesterday, I laid out the case that pointed to a strong holiday season for the computer maker. Today, Fortune's Philip Elmer-DeWitt does the legwork to discredit the arguments laid out by Huberty and Abramsky.

Kathryn Huberty was rated the "worst" in a survey of the 8 top AAPL analysts last September, based on her inability to correctly predict Apple's unit sales and revenue. She made the worst -- and most bearish -- predictions on Apple in Q2, predicting sales of 1 million iPhones (1.703 million were sold), 8.5 million iPods (10.644 million sold), and 2.021 million Macs (2.289 million sold). See the chart at Apple 2.0.

Apple's fiscal year ended last Saturday, September 27.

Analyst Gene Munster with Piper Jaffray, a strong Apple bull, wrote a note to clients Monday blaming the downgrades as the primary reason for the selloff, but disagreed with their assessment. "We believe fears of a continued global slowdown will impact equity investments in the tech sector, but our thesis leads us to conclude that Apple is better positioned than other tech players to weather the storm."

1. Consumer is slowing, but Street models reflect the slowdown. Our FY08 Mac unit growth estimate is 40%, going to 16% in FY09. We expect Mac growth of 29% this quarter.

2. We believe margin pressure concerns will prove to be overblown. The Street is modeling for 32% gross margin in FY09, down from 34% in FY08. We expect margin guidance to be 30-31% for December, in line or above the company's 30% gross margin guidance for FY09.

3. A disappointing preannouncement for Sept. is unlikely. We do not believe Apple will preannounce a disappointing September quarter. Our analysis of two months of NPD data on Mac and iPod, whih has a 0.90 correlation, suggests 5% upside to Street numbers.

Next, Elmer-DeWitt slams Mike Abramsky's rational for the Apple downgrade, though Abramsky has a stronger track record on AAPL. In his note, Abramsky references a survey that RBC Capital conducted with ChangeWave regarding computer purchases. The ChangeWave version of the survey lists corporate buying plans, with purchase intent for Macs dropping slightly from the prior survey in May 2008. However, on average, Apple's corporate buying intent has been rising over the past few years, while the corporate computer market in general has been plummeting.

These are good numbers for Apple in the enterprise market, made even stronger by a quote from ChangeWave VP Paul Carlton, "in an upbeat sign for Macs, respondents estimate that 18% of their company's workforce would choose to use a Mac if it were left up to the employees themseles -- triple the 6% who are currently using Macs."

RBC's version of the survey focused on consumers and showed a drop in the number of consumers who plan to buy a Mac in the next 90 days from 34% in August to 29% in September, the largest drop in more than two years. Surely this isn't a great sign, and indicates cooling on Apple, but perhaps not worth a downgrade -- or an 18% one-day drop.