Apple (NASDAQ:AAPL) hasn't been a stranger to analyst downgrades since margins began slipping and it began yielding market share to Android products. However, it was treated to one of its more colorful markdowns this week when Standpoint Research analyst Ronnie Moas knocked the stock on ethical concerns.
Moas downgraded the stock -- from hold to sell -- arguing that it's wrong for Apple to be paying its workers $2 an hour while it's hoarding away nearly $150 billion in cash and marketable securities. Moas argues:
They have workers who are doing back-breaking and eye-burning work in depressed states of mind and in many instances have already committed suicide... Instead of treating their employees like human beings, they are treated like animals. If it were not for their employees, Apple would not be where it is today. But instead of giving these people a better life, they give these people the bare minimum and defend this action with the argument that the wage is higher than the average there and in-line with what their competitors are paying.
To be fair, $2 an hour is roughly what Foxconn -- the Chinese contract manufacturer that makes smartphones for Apple and its rivals -- is shelling out to its employees. Under that argument, investors should be avoiding most of the leading makers of consumer electronics. After all, it's not just Apple.
Sure, just because everybody's doing it doesn't make it right. That's not much of a counter to Moas' bearish thesis. However, Apple is a company that sells products worldwide. Why should it be obligated to piece its components together in the country with the most expensive labor rate?
It's not even just about the money. President Barack Obama pleaded with Steve Jobs to bring production back into this country at a dinner three years ago.
"Those jobs aren't coming back," Jobs reportedly responded. Forget about how much more all smartphones would cost to assemble closer to home. Jobs argued that Asia offers shorter lead times and a greater pool of skilled factory workers. Money issues aside, it would take longer to roll out new products that were made domestically.
Apple isn't Ebenezer Scrooge. Apple Store locations in this country pay far more than the other retailers in the same mall. Apple's iPhone kicked off the smartphone revolution that keeps many wireless carrier stores in business.
Foxconn isn't perfect. Apple is no saint. However, it just seems wrong to be talking down the Cupertino giant because it makes too much money.
There's certainly a place for social investing, and there are plenty of Fools around here who are passionate about that. However, the best social investing stock ideas come from companies where the practices result in stronger operations. You don't just buy into Chipotle Mexican Grill (NYSE:CMG) because of its "food with integrity" mantra. Chipotle's a winner because the queues are long with burrito-seeking fans and its high standards create tastier eats. Chipotle's thought process is admirable, but it's not the secret sauce behind years of consistently positive quarterly comps.
One can always argue that Apple can do more, and that's probably a fair assessment of every single company. However, to downgrade a stock on moral grounds when outsourcing production to a more expensive contract manufacturer wouldn't necessarily result in a better product or improve consumer perception is just sloppy analysis.