HSBC Downgrades Apple for Lack of Faith in Services Push

Apple shares were downgraded to “reduce” by HSBC on concern its pivot into services will have lower margins and the new offerings including its streaming TV product will fall short of expectations.

Apple shares fell 0.4% in premarket trading Wednesday following the call to $198.65. HCBC’s $180 price target represents an additional 9% downside.

“Recent announcements on services has Apple putting money where its mouth is but returns could take some time to extract,” analyst Erwan Rambourg said in a note to clients Wednesday. “While the new offerings may garner consumer attention, we do not expect these services to move the needle significantly. We believe Apple has come too late to the game and its offering, by and large do not differ much or are below par to offerings from competition.”

The analyst also noted that the services business is likely to be less successful at gaining and keeping customers in emerging markets than it is in the U.S.

Apple shares are up 26% so far in 2019.

“Cash generation and a probable beat next quarter after a China-related warning early in the year will have some investors think the current valuation of Apple is reasonable,” Rambourg said. “We believe that following a 41% rise from January 2019 lows and relative optimism / complacency on the services announcement as well as sell-side ratings, there is now some downside.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza