Investors should sell Apple stock according to a Wall Street analyst.
Andy Hargreaves, an analyst at Pacific Crest Securities, said: “We recommend taking profits in Apple.
“Unless next week’s event details massive incremental profit opportunities, we are likely to downgrade Apple’s rating.”
Even though Apple is expected to launch two new iPhone 6s on a September 9 launch event, Hargreaves thinks that the stock rally would be short term, and iPhone volumes should fall in 2015 and 2016.
Hargreaves reasons: “This leaves limited room for upside to the stock, in our view, unless Apple launches new products that can generate billions of dollars of incremental operating profit.”
This is also in spite of the fact that the Cupertino company is likely to launch a new “wearable” smartwatch, the iWatch.
“Based on the work we have done, we do not expect either new segment to drive incremental profits that are meaningful at Apple’s scale in the near to medium term,” said Hargreaves.
“However, we are open to being wrong on this and believe investor confidence in the iPhone 6 cycle will support the stock through the coming event.
“Consequently, we recommend holding some position in Apple through the Sept. 9 event in the hope of getting clarifying detail on the profit potential of new products and services.”
“The majority of potential upside from iPhone 6 is priced into the shares,” Hargreaves added.
AP: Stocks Decline for Second day; Home Depot Falls
NEW YORK—Stocks slipped for a second straight day Tuesday as investors worked through a bundle of news from Apple, Home Depot and General Mills. Investors also watched international markets, where the dollar reached a six-year high against the Japanese yen.
KEEPING SCORE: The Dow Jones industrial average fell 52 points, or 0.3 percent, to 17,059 as of 11:10 a.m. Eastern time. The Standard & Poor’s 500 index eased five points, or 0.2 percent, to 1,997 and the Nasdaq composite declined 13 points, or 0.3 percent, to 4,579.
HOME REPAIRS NEEDED: Home Depot fell $1.22, or 1.3 percent, to $89.63 after the home improvement chain said that hackers had broken into its in-store payment systems. The problem follows a massive data breach at Target nearly a year ago.
APPLE OF MY EYE: Apple will be heavily traded Tuesday ahead of the company’s latest product announcements, starting at 1 p.m. As usual, Apple has been quiet about its latest offerings but analysts are expecting an iPhone with a larger screen and a watch-like device. Apple rose $1.14, or 1 percent, to $99.48.
BOUNCING BABY BUNNIES: Organic food products maker Annie’s jumped $12.68, or 38 percent, to $46.20 after General Mills said it would buy the company for $820 million in cash. Annie’s is best known for its boxed macaroni and cheese and rabbit-themed packaged food products. General Mills was unchanged on the news, trading down 10 cents to $53.43.
BREAKUP JITTERS: British markets were stabilizing after being shaken Monday. The jitters rose over concerns that Scotland might sever its centuries-old union with Britain in an independence referendum next week. Secession could hit Britain’s trade balance and dent its income from oil reserves that could revert back to Scotland. The pound fell more than one percent Monday after a poll showed a narrow majority in favor of independence for the first time. The U.K.’s FTSE 100 was down 0.3 percent in late-day trading.
DOLLAR BULLS: The dollar extended its rally, hitting 106.40 yen, the highest since September 2008. Compared with other major currencies hurt by bad economic news in their home countries, the dollar appears attractive. The Federal Reserve is expected to end part of its stimulus program by October and is considering rate hikes, signs of greater confidence in the U.S. economic recovery.
EXPORTERS: If the dollar were to continue to rally, it may start to hurt U.S. corporate profits. A higher dollar makes U.S.-made products more expensive abroad, which makes them harder to sell compared with foreign made goods. Investors don’t expect this dollar rally to continue over the long term, however.
“This could temporarily weigh on U.S. corporate profits, but U.S. companies generate so much business domestically that any impact would be modest,” said David Lebovitz, a global market strategist at J.P. Morgan Funds.
COMMODITIES, CURRENCIES AND BONDS: The dollar rose to 106.08 yen from 106.02 yen late Monday. The euro edged up to $1.2905 from $1.2897. Oil rose 50 cents to $93.15 a barrel in New York. On Monday it fell to $92.66 a barrel, the lowest price since January. Bond prices fell. The yield on the 10-year Treasury note rose to 2.50 percent.