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Apple Needs to Treat Employees 'Like Gods': Analyst

Tuesday, 25 Jun 2013 | 9:35 AM ET
A woman makes a purchase at the Apple Store in SoHo, New York.
Adam Jeffery | CNBC
A woman makes a purchase at the Apple Store in SoHo, New York.

Apple just can't seem to make anyone happy these days.

Investors continue to shy away from the stock, which dipped below $400 on Monday after Peter Misek, an analyst at Jefferies, lowered his price target for the iPhone maker on Monday citing supply chain checks.

(Read More: Three Reasons Why Apple May Be Dead Money)

But investors aren't the only ones running away from Apple. The company is beginning to have an employee retention problem that could pose a serious threat if it's not resolved soon, said Trip Chowdhry, an analyst at Global Equities.

"The stock price cannot be turned around if Apple can't attract people," Chowdhry told CNBC. "The employees should come ahead of shareholders. Apple needs to treat their employees like gods."

After speaking to recruiters at tech conferences, Chowdhry said there is a growing number of Apple employees who see the declining stock price as a sign to jump ship. The Apple workers are instead taking jobs at Google, LinkedIn, Facebook and even Hewlett-Packard, Chowdhry said.

Jefferies Analyst Cuts Apple Price Target
Apple's price target was cut to $405 at Jefferies, reports CNBC's Seema Mody.

"They look at the stock price and they feel that the future of Apple is bleak," he said. "They feel their talent could be more useful elsewhere than at Apple."

While Chowdhry still has a $650 price target and overweight rating on Apple's stock, he said his firm may revise its outlook after the company reports earnings.

"We are waiting to see what Apple says in earnings. If they are disastrous and they don't talk about what they are doing to keep employees and continue to talk about share buybacks, then I don't think it's going to work out for Apple," he said.

(Read More: Apple CEO's Stock Grant Now Tied to Stock's Performance)

Gene Munster, managing director and senior research analyst at Piper Jaffray, said Apple's stock performance, which has fallen about 25 percent this year, and employee morale are closely linked. He said coming product launches may help restore the morale and the stock price.

Munster, who has a $655 price target with an overweight rating, said there's a 95 percent chance Apple will launch a cheaper iPhone this year. He said he also expects the company to unveil a television set and possibly an iWatch sometime next year.

(Read More: Finally! HBO GO and ESPN App Come to Apple TV)

"The morale is partially tied to the stock. That 's why I think it keeps coming back to these products. And the reality is that if these products are what we expect them to be, that should get the stock going and that should be good for morale," he said on CNBC's "Power Lunch."

"Big picture, it's been pretty lethargic on the products over the last six quarters and we should see a measurable uptick which ultimately should give us positive earnings revisions which I think the stock desperately needs."

(Read More: Apple to Release Several 'Game Changers': Cook)

But investors shouldn't hold their breath, growth is still looking pretty sluggish for the company in the near term, analysts said.

Misek, who cut his price target to $405 from $420 on Monday, also slashed his estimate for iPhone orders for the rest of the year.

The company is expected to make 25 million to 30 million iPhone units between July and September, Misek said in a note to clients. He had previously estimated 40 million to 45 million. He also made downward revisions for the holiday quarter, estimating that Apple would plan to make 50 million to 55 million iPhones, down from 60 million to 65 million.

Still though, Munster said he is sticking to his $655 price target and betting that Apple will follow through with devices that will send the stock up.

"It's hard to see and imagine right now, just because there is another September quarter ahead of this where we aren't going to see much of an impact," Munster said. "If they come out with those new products, we feel great about that price target, but if they disappoint us, I'm in trouble."

—By CNBC's Cadie Thompson. Follow her on Twitter @CadieThompson.

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  • Matt Hunter is the senior technology editor at CNBC.com.

  • Cadie Thompson is a tech reporter for the Enterprise Team for CNBC.com.

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.

  • Jon Fortt is an on-air editor. He covers the companies, start-ups, and trends that are driving innovation in the industry.

  • Lipton is CNBC's technology correspondent, working from CNBC's Silicon Valley bureau.

  • Mark is CNBC's Silicon Valley/San Francisco Bureau Chief covering technology and digital media.