U.S. stock market futures are kicking off the week a little lower on Monday, largely in part to a pair of early headlines. For one, four Arab nations have cut ties with Qatar, alleging that the country supports Islamist groups — news that adds a touch of uncertainty into global markets. And while that announcement initially caused oil to spike, the commodity is back to trading lower.
Also weighing on U.S. stocks is Apple Inc. (NASDAQ:AAPL), which was the subject of a downgrade and one of several stocks to watch this morning. Also in the spotlight are Pandora Media Inc (NYSE:P) and everyone’s favorite Bill Ackman target, Herbalife Ltd. (NYSE:HLF).
Here’s what you need to know heading into Monday’s trade.
Apple Inc. (AAPL)
Today was supposed to be Apple’s day in the sun — its annual WWDC developers’ conference, where the tech giant is always good for a reveal or major announcement of some sort. Among expectations for this year’s edition are a new Siri smart speaker, updated MacBooks and new developments in Apple Music and other apps.
However, Pacific Crest analyst Andy Hargreaves has wrested some of that attention away with a Sunday downgrade of AAPL stock.
“We believe AAPL anticipates strong performance in the iPhone 8 cycle, while providing relatively little weight to risks through the cycle or the potential for iPhone sales to decline in FY19,” Hargreaves said in lowering Apple from “Overweight” to “Sector Weight.”
Hargreaves also lowered his price target on Apple stock to $145, which implies about 7% downside from Friday’s closing price. He also cited “gross margins, elasticity, supply issues, or the likelihood for declines beyond the iPhone 8 cycle” among his concerns.
Those supply issues include the possibility that the OLED iPhone 8 could be delayed until October, and that Apple will slowly ramp up production, shifting some sales out of FY17 and into FY18. As a result, Hargreaves lowered his FY2017 earnings estimate to $8.86 per share, and improved his FY2018 estimate to $10.53.
AAPL shares, which spent last week trying to reclaim all-time highs above the $156 level, is off about 1% this morning on the news.
Pandora Media Inc (P)
Pandora’s woeful 2017 is getting a little rosier this morning on news that Verizon Communications Inc. (NYSE:VZ) might be waiting in the wings.
Specifically, the New York Post reported on Sunday that Verizon is considering a $100 million investment in the streaming radio company should it not sell out to satellite radio firm Sirius XM Holdings Inc. (NASDAQ:SIRI). CEO Lowell McAdam says the company is otherwise engulfed with integrating Yahoo! Inc. (NASDAQ:YHOO) with AOL, hence a mere investment versus an outright acquisition.
Still, even that news is good news for Pandora, which is off roughly 30% year-to-date despite talks from Sirius XM about buying it up for $11 to $12 per share of P stock. Of course, that’s mostly because the buying price keeps ticking lower — Sirius XM initially made a $15 bid last summer, and negotiations supposedly were for $13 per share just a month ago.
The Post says other options include a $150 million investment from KKR & Co. L.P. (NYSE:KKR).
P shares are 3% higher on Monday morning.
Herbalife Ltd. (HLF)
Lastly, HLF shares are off soundly in premarket trading after the company lowered its quarterly revenue estimates.
Herbalife put out a sunny headline boasting that 90 percent of its U.S. sales “were documented purchases by consumers” — figures that “far exceed” the 80% threshold required by its deal with the U.S. Federal Trade Commission. That deal was put in place as part of a settlement with the FTC that forced Herbalife to restructure its multi-level marketing operations and pay a $200 million fine.
However, in the same release, Herbalife guided a revenue metric, “Volume Point Change,” about 3 percentage points lower.
The news is knocking HLF shares down by about 6% this morning — no doubt welcome news for Bill Ackman, who has been short the company for about five years.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.