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stock will fall because sales from its new services offerings will disappoint, according to HSBC Global Research.
The back story. Apple stock (ticker: AAPL) has risen more than 25% year to date through Tuesday as investor sentiment over its strategic shift to services has improved, and that’s put it less than $13 shy of a $1 trillion market valuation.
Last month, the company unveiled an array of new paid services such as Apple TV+ (video subscription), Apple Arcade (gaming subscription), and Apple News+ (news and magazine subscription).
What’s new. HSBC analyst Erwan Rambourg on Wednesday lowered his rating on Apple stock to Reduce from Hold, predicting the new service offerings won’t attract additional buyers to the company’s iOS ecosystem.
“Services makes ecosystem more sticky but won’t necessarily enable Apple to recruit more consumers to iPhone,” he wrote. “All in, we remain far more cautious on services than some of the numbers in the street might suggest.”
Apple stock was down 49 cents to $199.01 in Wednesday morning trading. The company did not immediately respond to a request for comment.
The analyst predicts the newly announced services offerings will lead to just $12 billion in sales by 2024 and generate lower profit margins versus its current services revenue.
After the “relative optimism / complacency on the services announcement as well as sell-side ratings, there is now some downside,” he wrote.
Looking ahead. Rambourg raised his price target for Apple shares to $180 from $160, but that still represents 9% downside to the current stock price.
Last month, Barron’s suggested Apple shareholders may want to take some profits due to the disappointing services announcements and the big rise in the share price this year.
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