HSBC just put out a big warning to investors—it is time to sell Apple stock. The news comes as a bit of a surprise because the iPhone maker has been performing well this year and there have been rumors of a big new push into healthcare. However, HSBC says investors should get out of the stock because Apple’s new services business will disappoint. The bank summarized its view this way, saying “Services makes ecosystem more sticky but won’t necessarily enable Apple to recruit more consumers to iPhone … All in, we remain far more cautious on services than some of the numbers in the street might suggest”.
FINSUM: Not only does HSBC think the new services offerings will disappoint on the top line, but they think they will be lower margin too! It is hard to speculate how this might go, but we do think this transition to services will be harder than many expect.
You certainly won’t think of it this way, but Morgan Stanley is arguing that Apple is now a great healthcare play. The bank’s research team says Apple is on the verge of a major new product that will transform the healthcare space, meaning there could be a lot of value in the stock that is not being priced in. Katy Hubert of MS says “Apple is building a healthcare ecosystem and is poised to emerge as a leader in consumer-centric healthcare … Healthcare is a large, greenfield services opportunity for Apple”. She continued, saying “Unlike recent announcements on news, gaming, video, and payments, where Apple is joining existing competitors, healthcare is a market where Apple has the potential to lead digital disruption”. The stock is up strongly this year because investors are happy with its shift to a more services-oriented business model.
FINSUM: It is hard to speculate on the potential impact without know the product, but we must say Apple does seem to have a major opportunity if it can map a healthcare product onto the hundreds of millions of users of its products in the US alone.
American investors generally don’t pay enough attention to merging markets. We have such a big economy and markets that investing abroad often feels foreign and unnecessary. However, the diversification benefits of doing so can be huge, and right now may be an excellent time, says Morgan Stanley. The bank’s lead emerging markets strategist, Ruchir Sharma, is changing tune. For the last decade he said US shares, and particularly tech, would outperform. Now the pendulum is swinging back, with EM likely to take the lead.
FINSUM: EMs have obviously been beat up over the last decade, so there is certainly value to be had. The big worry for us is about global trade policy and how that constrains EM growth.
The next couple of years is supposed to be the new golden age of tech IPOs. Huge Silicon Valley unicorns like Uber and Lyft ae supposed to IPO, as are a slew of less well-known, but still big, names. All the activity is supposed to kick off very soon as Lyft has just priced its IPO. The company is seeking a valuation of about $23 bn based on an offering of just over $2 bn of shares. Uber, its rival, is planning to IPO soon as well, and looking for a valuation north of $100 bn.
FINSUM: Let’s put the Lyft valuation in perspective—the company has $2.16 bn of annual revenue, but lost almost a $1 bn in the last year. Quite eye-opening.
Goldman Sachs is launching an interesting suite of new ETFs to help investors gain exposure to emerging areas of technology. The bank’s new offerings include ETFs for human genome research and robotic surgery. In total, the firm launched five new ETFs driven by a strategic partner specializing in calculating companies’ thematic beta. The other ETFs cover innovative financial, data, and manufacturing companies.
FINSUM: This could be an interesting small allocation to portfolios. Some clients are very hot on these new technologies and this might be a nice liquid way to access them. Fees are 50 basis points.