Wall Street made some big calls on Club stocks to kick off the first week of 2024. Here’s a summary of the commentary and where we agree and disagree with the analysts. Apple Wall Street’s take: The new year began with a bang in Big Tech and not in a good way. Apple stock received a rare downgrade from Barclays on Tuesday. Analysts slashed their rating to underweight from equal weight (sell from hold). The bank also trimmed the tech behemoth’s price target to $160 per share from $161. “IP15 has been lackluster and we believe IP16 should be the same,” analysts wrote in a Tuesday note, referring to current and future iPhone models. “Other hardware categories should remain weak, and we don’t see services growing more than 10%. We expect reversion after a year when most quarters were missed and the stock outperformed.” The Club’s take: Apple remains one the best companies in the world and a core position of our portfolio. We see three drivers: customer loyalty and a sticky ecosystem; high-margin Services; and cash flow. Barclays dismissing 10% growth in Services is ill-advised. It gets harder and harder to pull off big percentage gains when sales are so high. After all, the unit pulled in $22.3 billion in revenue in Apple’s latest quarter. However, we fully expect Services revenue growth to continue, especially with Apple making a concerted effort to enter new markets with massive potential, such as India), where new device sales will prompt new entrants into the ecosystem and further support Services growth. On Jan. 2, we trimmed Apple along with other big 2023 tech winners. We always say about Apple stock “own it, don’t trade it.” However, selling a few shares of your biggest position to take profits on huge gains never hurts you. Our discipline is to never be greedy and maintain a diversified portfolio. So, when a stock runs as Apple did in 2023 and exceeds a 5% weighting in the portfolio, we look to trim it as the mantra of “discipline trumps conviction”…
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