Apple Inc. (APPL) shares were indicated lower in pre-market trading after a rare downgrade for the world's biggest tech company by San Francisco-based Pacific Crest Securities, which advises clients to buy shares in Google owner Alphabet Inc. (GOOGL - Get Report) instead.
Pacific Securities analyst Andy Hargreaves said that while Apple "anticipates strong performance in the iPhone 8 cycle" it has given "relatively little weight to risks through the cycle or the potential for iPhone sales to decline" in its 2019 fiscal year. Pacific Crest also noted that "Recent supply checks suggest iPhone 8 (OLED) may be delayed until October with limited initial supply that ramps through" to the first quarter of the company's 2019 fiscal year, which begins on Oct. 1.
Hargreaves reduced his view on Apple to sector weight, from a previous rating of overweight, and thinks the stock could fall by $10 over the next year. Apple shares were indicated around 1% lower in pre-market trading, suggesting an opening price of $153.86 each against a flat projection to the Nasdaq benchmark.
TheStreet's Jim Cramer noted the unusual downgrade on his Twitter account early Monday, and in particular questioned the timing of the move, which comes just ahead of the Cupertino, California-based company's Worldwide Developers Conference (WWDC), which runs from June 5-9, kicks off later today with a keynote speech from CEO Tim Cook, where he'll likely unveil Apple's latest iPhone operating system iOS 11.
Weird on developer day.. It is a huge position of my trust, but so is Alphabet... Not sure if it is the right time to downgrade.... https://t.co/1l3ug6Q7fT— Jim Cramer (@jimcramer) June 5, 2017
Pacific Crest said it recommends that "large-cap tech investors use proceeds from sales of AAPL to purchase GOOGL", for which it has a $1,100 price target, on the basis that is has "an excellent risk/reward profile and more substantial upside potential than AAPL."
Alphabet shares were indicated only marginally lower than their Friday closing price of $996.12, having gained around 25% so far this year -- compared to a 34.2% advance for Apple.
Apple's live stream of WWDC can be viewed on devices with its Safari web browser, Windows 10-enabled PCs and via Apple TV, starting at 1:00 PM Eastern on Monday.
The rumor mill has been churning out tons of theories about what the new iOS 11 might include, such as a "dark mode," which would replace the white background for a black one at night.
Other expected software updates include a new version of Apple Music that focuses on video (largely to showcase its upcoming original content offerings), an Apple Pay update that allows peer-to-peer mobile payments and new augmented reality features. WWDC 2017 is also expected to bring updates to the macOS, watchOS and tvOS.
Jim Cramer and the AAP team hold positions in Apple for their Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AAPL? Learn more now.
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