Cold shower on Apple: Barclays lowers target to $160

The new financial year began with Bitcoin's rise above $45,000 and a (surprise) downgrade of the world's leading company by capitalisation: Apple. At the end of 2023 it was close to $200 per share, giving it a market value of around $3 trillion, a little more than Microsoft's $2,800, which has been trailing it for a while. According to Barclays analysts, however, Apple's stock is now "underweight". They have consequently lowered the target price from $161 to $160, 17% lower than the current price ($192). There are several reasons for this: increased risks associated with services, concern about the volume of iPhone sales, and the lack of a recovery in sales of Mac computers, iPads and wearable devices. In short, doubts about the likelihood of continued growth in multiples that now see the stock priced at 29 times expected year-end earnings.

In some ways this is a cold shower because this downgrade comes at a euphoric time for the financial markets, which are coming off two months of extraordinary growth. The market's hot reaction has been felt. The European stock exchanges sharply reduced the gains of earlier in the morning (the Ftse Mib went from +1.5% to +0.3%). Futures on the US stock exchanges were in the red (Nasdaq -0.8%) due to the expected drop in Apple shares (-2% in pre-market). The dollar, considered a thermometer of risk, is also rising. The dollar index is up 0.7% near 102 points. As a result, the euro, which in recent days had exceeded $1.11, is losing ground and is trading at $1.096.

It remains to be seen whether one business house's 'rejection' of Apple can be confined to an isolated element, or whether it can represent the excuse that many traders have been waiting for to take some profit after the excesses of euphoria in the last two months of 2023. So many technical indicators have gone into overbought mode.

"The King is naked. This is the meaning of Barclays' downgrade of Apple, the world's leading company by capitalisation," explains Antonio Lengua, a professional trader and expert in volumetric analysis. Without going into the details of the decision, the timing of this announcement, unexpected and against the grain, catches the markets unprepared at the beginning of 2024 and on the eve of the Q4 quarterly reports. Will other houses come along to share Barclays' bearish view? If other big names join this view, we can expect a 2024 start in the long term, the opposite of what happened in early 2023. Attention should also be paid to the impact on the VIX and VXN (nasdaq volatility): after a few weeks of very low values, a rapid rise in these indices, if maintained for a few sessions, may force vol control funds, which have been accumulating long positions throughout November and December, to reduce their portfolios.

The Asml case
It is not just Apple. Among the negative market movers on this first day of 2024 is also the title Asml, a well-known European chip manufacturer. The company cancelled - under US pressure - many orders for China by the end of January. China was Asml's third largest market for lithography systems, accounting for 46% of its total sales in Q3 2023. "The tightening of US controls on exports of semiconductor equipment and artificial intelligence chips to China will have a negative impact on Nvidia, Asml and Tsmc. This is putting pressure on the entire sector, opening up questions on the quarterly results of these giants while China will continue to develop its products for the Asian market,' explains Stefano Bottaioli, financial analyst. 'This news, together with numerous technical signals that the markets are extremely euphoric, could be the trigger for a major corrective wave'.