Apple's foray into new services 'too late', says HSBC

HSBC has downgraded its rating on shares of tech giant Apple to 'reduce' from 'hold' as it assesses the company's foray into new services, which it reckons has come too late.

At its "Show Time" event last month, Apple announced a series of new services across some its apps: Apple News+, Apple TV+, Apple Arcade and Apple Credit card.

"Recent announcements on services has Apple putting money where its mouth is but returns could take time to extract ," HSBC said in a note.

"While the new offerings may garner consumer attention, we do not expect these services to move the needle significantly. We believe Apple has come too late to the game and its offering, by and large do not differ much or are below par to offerings from competition."

The bank said that from a profit & loss standpoint, the new services will potentially generate around $12bn, but yield lower margins versus the current services portfolio.

HSBC said that cash generation and a probable beat next quarter after a China-related warning early in the year will leave some investors thinking the stock's current valuation of Apple is reasonable.

"We believe that following a circa 41% rise from January 2019 lows and relative optimism/complacency on the services announcement as well as sell-side ratings, there is now some downside."

The bank upped its price target on the stock to $180 from $160.