UPDATE: BMO Capital Markets Downgrades Apple to Market Perform, Lowers PT on Increased Capital Allocation

In a report published Wednesday, BMO Capital Markets analyst Keith Bachman downgraded the rating on Apple AAPL from Outperform to Market Perform, and lowered the price target from $440.00 to $435.00. In the report, Bachman noted, “Apple posted a solid Q in terms of units/revenues, but disappointed with gross margins at the low end of the range (37.5%). As we had suggested, Apple materially increased its dividend and buyback. By our math, Apple will now have a 3% dividend yield and ~2% annual share buyback. However, we think the March Q results were also consistent with our longer-term concerns about Apple having to trade off revenue growth vs. margins. Moreover, while the material increase in capital allocation is a positive, we think the challenges of 1) increased competitiveness in the smartphone market, which we believe will pressure ASPs and margins – will largely offset 2) improved capital allocation.” Apple closed on Tuesday at $406.13.