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Monday, July 23, 2007, 11:00 am PT (02:00 pm ET)

S&P downgrades Apple shares to "Hold' on valuation

Citing risk-reward considerations, analysts for Standard and Poor's Equity Research cut their rating on shares of Apple Inc. to "Hold" early Monday.

"We believe Apple's fundamentals remain strong on market-share gains in desktops and laptops, success with digital-media players and software, and notable inroads in the smartphone category," wrote analyst Scott Kessler.

As a result of these successes, the analyst said he believes Apple should trade at a greater premium to the price/earnings-to-growth rate of the S&P 500 Technology Sector. He therefore raised his 12-month target price on shares of the Cupertino-based company to $155 from $135.

Simultaniously, however, Kessler hedged long-term bets on the stock by cutting his rating to a "Hold."

"We think our downgrade is warranted by risk-reward considerations, especially with expectations high and Apple scheduled to report June-Q results on Wednesday," he wrote.

In late May, Standard & Poor's announced that Apple had joined its prestigious S&P 100 index of big blue-chip companies.