A UBS analyst recently cut the firm’s rating on Apple stock, while lifting the ratings on two other stocks.
David Vogt, new UBS hardware and networking analyst, recently cut the firm’s rating on Apple stock (AAPL) to neutral from buy, with a new price target of $115, up from $106, mostly on a valuation basis, Barron’s said.
He lifted the firm’s rating on both HP Inc. (HPQ) and Dell Technologies (DELL) to buy from neutral. He maintained the company’s buy rating on Arista Networks (ANET).
On Apple, Vogt warns its hardware business is likely to revert to low single-digit growth.
“At its core, Apple is a product company with roughly 80% of revenue derived from smartphones, personal computers, tablets, and wearables,” he writes in a research note. “While services revenue has increased at a 23% [compounded annual growth rate] over the past four years, product revenue has grown in the low single digits as iPhone, Mac, and iPad have struggled. Following a one-time COVID-driven bump in Macs/iPads and a one-year iPhone 12 cycle, in fiscal 2021, product revenue should revert back to low-single digit growth over the next three years.”
His buy ratings on Dell and HP reflect what he calls “strategic optionality,” while he thinks Arisa can drive earnings above consensus. His least-preferred names are Cisco, HP Enterprise and IBM, “as they face revenue headwinds arising from secular pressures.”
However, the risk-off sentiment on Wall Street fueled the third-worst weekly outflow on record from U.S. equities, with technology shares falling out of favor.
U.S. stock funds bled $25.8 billion in the week through Sept. 23, according to Bank of America Corp. and EPFR Global data, in a reversal from the previous week’s biggest inflow in more than two years. Investors exited the hottest sector of the rebound, pulling the most money out of tech funds since June 2019, Bloomberg reported.
While traders were buying the dip just a week ago, sentiment has switched firmly to risk off in recent sessions, with pessimism seeping in about the prospect of further fiscal stimulus to support the world’s biggest economy.
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