Displaying items by tag: services

(San Francisco)

Barron’s has featured a very eye-opening call. The argument comes from the CIO of Ariel Investments. She argues that it is time to short Apple. Referring to the company as the “blue chip of yesterday”, she contends that Apple is not a tech company, but a consumer electronics one, and that whether its new products are a hit has a huge impact on revenue. It is trying to pivot to services, but it has no first mover’s or any other natural advantage in doing so and is competing with big names like Netflix and Disney. It is even behind competitors in its core iPhone business and trying to catch up. She argues that a blue chip of yesterday is the worst kind of stock because all the good news is priced in, but none of the bad news is.

FINSUM: This is quite a stark portrayal of Apple. While we do not completely agree, there is some significant truth to this argument and it warrants concern.

(New York)

Apple has been on an absolute tear lately. All the bearishness which preceded the newest iPhone launch set the company up for a great run. The stock is up a mind boggling 65% this year. To put that $450 bn of value appreciation in perspective, it is equivalent to adding the market caps of SalesForce, IBM, and SAP on top of what Apple already was at the end of 2018. So where does it go from here? The thing is, Apple usually continues a big upswing after an iPhone launch, so history is on its side right now.

FINSUM: iPhone sales may continue to surprise to the upside but the medium- to long-term question is whether investors will buy into Apple’s pivot into credit cards, gaming, and streaming.

(New York)

The stock market is in knots this week. The trade war between the US and China is increasing in intensity even as the two sides negotiate. This morning it hit a new peak as Trump hiked tariffs on $200 bn on Chinese goods. With the trade war looking more likely to continue, Goldman Sachs has recommended what it says are the best stocks for an all-out trade war. The general idea from David Kostin’s team at GS is to buy service firms, which are less exposed to tariffs and have better corporate fundamentals. Here is a list of the companies in Goldman’s selection group: Facebook, Visa, Bank of America, Walt Disney, Home Depot, Netflix, McDonalds.

FINSUM: This is an interesting mix of large and mega caps and we agree with Goldman’s simple, yet compelling thesis.

(San Francisco)

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.

(San Francisco)

In what could be a major development for super power Apple, it was reported yesterday that the company was inching towards “Apple Prime”, or some sort of bundled service model similar to Amazon Prime. The company may combine news, magazine articles, and television into a single bundle. Some analysts say Apple needs to increase its service-based revenue, such as that built on monthly subscription fees, in order to continue to expand.

FINSUM: If Apple wants to keep growing at 5%, it needs to add the equivalent of a Fortune 200 company every year. That is a huge revenue goal, and this could be a way to do it.