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Bear Keeps Apple ‘Sell’ Rating, $270 Price Target

Apple’s business model faces enough pressure from open-source services and competition in emerging markets that its stock price could lose 40 percent of its value, one analyst said Monday.

“This story is about the iPhone, it’s about the iPhone ecosystem. Apple created something great. The Internet is coming along with open standards. The world’s biggest app store is not going to be on Apple’s website. It’s not going to be on Google’s website. It’s going to be the Internet,” ACI Research CEO Edward Zabitsky said on “Fast Money.”

In May 2010, Zabitsky predicted Apple’s share price would drop 50 percent.

Instead, the stock price rallied 125 percent since his last appearance, recently posting blockbuster earnings.

“There’s no doubt I was way too early on the call,” said Zabitsky, who currently held a “sell short” rating on the stock and a price target of $270.

Apple shares closed up 1.3 percent at $453.01.

“Everything that moves to the internet gets commoditized. If you look at what happens in Web 1.0, computing moved off the desktop. If you look at what’s happening in 2.0, it’s moving off the phone and out into the network,” Zabitsky said.

Apple, he added, faced a real threat from open-source products, as well as from Samsung.

“The key to their success has been the convenience factor, and that’s the convenience that gets a luxury buyer to buy something at a higher price. So once the convenience factor goes away and the closed ecosystem goes away, then you have a different story,” he said.

OptionMonster.com’s Jon Najarian mentioned the iPhone’s aspirational status in emerging markets, noting how Beijing shoppers threw eggs when the iPhone 4 launch was delayed.

But the Toronto-based analyst called the iPhone too expensive, especially as it faces increasing competition from such products as China’s OPhone.

For $150 to $200, users will be able to buy non-Apple smartphones with most of the conveniences of the iPhone, Zabitsky said.

Trader Pete Najarian didn’t buy the reasoning, noting this year’s expected release of such products as the iPad 3 and the iPhone 5.

“I just don’t quite see it slowing down at this point in time,” he said. “I see just too much coming out in 2012.”

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Trader disclosure: On Jan. 30, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; P. Najarian is long AAPL; P. Najarian is long Long BAC calls; P. Najarian is long C; P. Najarian is long JPM calls; P. Najarian is long MSFT; P. Najarian is long INTC; P. Najarian is long YHOO; P. Najarian is long CROX callsl Grasso owns ASTM; Grasso owns AVAV; Grasso owns BA; Grasso owns D; Grasso owns LIT; Grasso owns MHY; Grasso owns PFE; Grasso owns PRST; Grasso owns S; Grasso owns WFT; Grasso owns XLU; J. Najarian is long CBOE; J. Najarian is long CME; J. Najarian is long CIGX; J. Najarian is long SPLS puts; J. Najarian is long AAPLS call spreads; J. Najarian is long RIMM call spreads; J. Najarian is long GLD call spreads; J. Najarian is long CROX call spreads; J. Najarian is long TXT call spreads; J. Najarian is long WLT call spreads; Brown is long AAPL; Brown is long JPM; Brown is long IBB;

For Steve Grasso
Stuart Frankel & Co and it’s partners own CSCO

Stuart Frankel & Co and it’s partners own CUBA

Stuart Frankel & Co and it’s partners own GERN

Stuart Frankel & Co and it’s partners own HPQ

Stuart Frankel & Co and it’s partners own HSPO

Stuart Frankel & Co and it’s partners own MU

Stuart Frankel & Co and it’s partners own NYX

Stuart Frankel & Co and it’s partners own PRST

Stuart Frankel & Co and it’s partners own WFT

Stuart Frankel & Co and it’s partners own XRX

For Colin Gillis
(YHOO) Investment banking (next 3 months): BGC Financial LP and/or its affiliates, expect to receive, or intend to seek, compensation for investment banking services within the next three months from all of the companies referenced within this report.

Lead or Co-manager: BGC Financial LP and/or its affiliates, has not acted as lead or co-manager in a public offering of equity and/or debt securities for Google within the last 12 months. BGC Financial LP and/or its affiliates has not received compensation for investment banking services in the last 12 months from Google.

Lead or Co-manager: BGC Financial LP and/or its affiliates, has not acted as lead or co-manager in a public offering of equity and/or debt securities for Microsoft within the last 12 months. BGC Financial LP and/or its affiliates has not received compensation for investment banking services in the last 12 months from Microsoft.

Lead or Co-manager: BGC Financial LP and/or its affiliates, has not acted as lead or co-manager in a public offering of equity and/or debt securities for Yahoo within the last 12 months. BGC Financial LP and/or its affiliates has not received compensation for investment banking services in the last 12 months from Yahoo.

(GOOG) Investment banking (next 3 months): BGC Financial LP and/or its affiliates, expect to receive, or intend to seek, compensation for investment banking services within the next three months from all of the companies referenced within this report.

For Edward Zabitsky
No disclosures

For Abigail Doolittle
Doolittle is long SSO

Doolittle is long SDS

Doolittle is long FAZ

For Pierre Ferragu
(RIMM): I, Pierre Ferragu, Senior Analyst(s)/Analyst(s), certify that all of the views expressed in this publication accurately reflect my/(our) personal views about any and all of the subject securities or issuers and that no part of my/(our) compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views in this publication.

For Kimberly Greenberger
Within the last 12 months, Morgan Stanley has either provided or is providing non-investment banking, securities-related services to and/or in the past has entered into an agreement to provide services or has a client relationship with the following company: Abercrombie & Fitch Co., Express, Inc., Guess, TJX Companies Inc.

Morgan Stanley & Co. LLC makes a market in the securities of Abercrombie & Fitch Co., Aeropostale Inc, American Eagle Outfitters, Inc., AnnTaylor Stores Corp, Chico's FAS Inc., Children's Place Retail Stores Inc., Coach Inc, Express, Inc., Gap Inc, Guess, Limited Brands Inc, Lululemon Athletica Inc., Michael Kors Holdings Ltd, Ross Stores Inc., Tiffany & Co., TJX Companies Inc., Urban Outfitters Inc.

Morgan Stanley & Co. International PLC and its affiliates have a significant financial interest in the debt securities of Gap Inc, Limited Brands Inc, TJX Companies Inc..

For Nik Modi
1. UBS AG, its affiliates or subsidiaries beneficially owned 1% or more of a class of the following companies' common equity securities as of last month`s end (or the prior month`s end if this report is dated less than 10 days after the most recent month`s end): Energizer Holdings

2. The U.S. equity strategist, a member of his team, or one of their household members has a long common stock position in Altria Group.

3. The U.S. equity strategist, a member of his team, or one of their household members has a long common stock position in Procter & Gamble Co.

4. This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investment banking services are being, or have been, provided.: Procter & Gamble

5. This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-investment banking securities-related services are being, or have been, provided.: Procter & Gamble

6. This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities services are being, or have been, provided.: Procter & Gamble

7. Within the past 12 months, UBS Securities LLC has received compensation from this company/entity: Procter & Gamble.

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