Rough times for Apple, suddenly.
The stock fell ~4.22% today, falling to $US98.94.
There’s two reasons for the stock to be tanking: The iCloud photo scandal, and a note from Pacific Crest analyst Andy Hargreaves telling investors to sell Apple shares.
Last week, the company was flying high as anticipation built for the iPhone 6, and the iWatch, which are expected to be announced next week. The stock was hitting new all-time highs, trading up to $US103.20, but today it’s back under $US100.
It all came to a screeching halt over the weekend for Apple, when nude photos of celebrities hit the web. Apple’s weak security on iCloud, where the photos were backed up, was blamed for the photos hitting the web.
The timing couldn’t be worse. Apple is about to roll out a new mobile payments feature, as well as health tracking data tied to your iPhone. Most of that data is likely to be stored right on the phone, and therefore more secure. However, most people won’t understand that delineation. Most people will think, “If Apple can’t be trusted with photos, can it be trusted with banking data and health data? “
Unrelated to the nude photo scandal, Pacific Crest’s Hargreaves says, “We recommend taking profits in Apple.” That is, if you’ve gained some upside from Apple shooting to $US100+, then now is the time to lock in that upside with a share sale.
Hargreaves thinks that Apple will sell a lot of iPhone 6 units, but after that it will be hard to sell more iPhones to new users. As the iPhone 6 buzz wears off, he thinks the stock will sink.
Apple has new products coming — mobile payments, a wearable gadget — but he doesn’t think that’s going to be enough to drive big profit gains.
Here’s Hargreaves’ key take away:
“We recommend investors begin to take profits in AAPL. The stock is currently trading above our $US100 price target and we believe prices in the vast majority of potential upside from the iPhone 6 product cycle. We are maintaining our Outperform rating until we see detail on new products and services at Apple’s Sept. 9 event. However, if the announced products and services do not suggest massive incremental profit opportunities, we are likely to downgrade our rating for AAPL.”
And here’s another bit. We bolded the most important sentence. Note that he says investors should hang on to some Apple, just in case.
“We expect a new payment partnership and entrance into the wearables category to be Apple’s most significant new product launches in the next six months. 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. 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 AAPL through the Sept. 9 event in the hope of getting clarifying detail on the profit potential of new products and services.”
Not every Apple analyst is negative, though. Yesterday Gene Munster upped his price target to $US120, and a few weeks ago Morgan Stanley laid out the case for staying bullish on Apple through the iPhone 6 and beyond.
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