HSBC downgrades Apple shares as it warns of ‘market saturation’

Apple shares fell almost 4 percent on Tuesday after HSBC downgraded shares of the tech giant for the first time in 34 years, blaming it on slow growth, smartphone saturation in the markets and a lack of innovation at the company.

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“What has made the success of Apple, a concentrated portfolio of highly desirable (and pricy) products is now facing the reality of market saturation,” the banking and financial services company wrote.

TickerSecurityLastChangeChange %
AAPLAPPLE INC.116.59+0.56+0.48%

HSBC downgraded Apple shares to hold from Buy, slashing its target price to $200 from $205. The growth period of Apple’s most iconic hardware -- the iPhone -- has largely ended, HSBC said, adding that revenue is only supported by higher-selling prices and the development of services. Shares fell to $177.51 from $180.57.

In a lengthy note, HSBC went into an in-depth explanation about its decision to downgrade the company.

“While we understand the company’s interest of not disclosing unit sales of hardware and focusing more on service gross margin, investor enthusiasm could be the victim of a lengthy transition phase as the focus shifts,” HSBC said.

Apple has struggled to reverse a downturn this year: During its Nov. 1 earnings call, officials warned that holiday sales would likely miss Wall Street’s expectations. They also said they’d no longer disclose the number of iPhone sales in quarterly reports, stoking investor concerns that sales would continue to decline.

On Friday, the iPhone-maker lost its spot as the world’s most valuable publicly traded company to Microsoft. Apple’s market capitalization is now about $847 million, compared to Microsoft’s $851 billion.