The major stock market indices were mixed early Friday afternoon, with an upbeat August retail sales report unable to ignite a strong rally.
|Dow Jones Industrial Average (DJINDICES: ^DJI)||0.13%|
|S&P 500 (SNPINDEX: ^GSPC)||0.02%|
|Nasdaq Composite (NASDAQINDEX: ^IXIC)||N/A|
Data source: Yahoo! Finance.
A couple big stocks were hit by bad news Friday. Apple (NASDAQ: AAPL) stock declined as an analyst became more pessimistic following its recent product announcements, and shares of Altria (NYSE: MO) were bruised by a slumping valuation for its massive stake in Juul.
Apple hit by a pessimistic price target
Shares of Apple had been riding high following the company's unveiling of its latest iPhones, but the stock declined on Friday as analysts at Goldman Sachs dropped their pessimistic price target even further. The issue is with Apple's decision to give away one year of Apple TV+ with hardware purchases, a move that could hurt average selling prices and earnings. Shares of the tech giant were down about 2.6% at 12:45 p.m. EDT.
Apple's iPhone 11. Image source: Apple.
Goldman kept Apple's rating at neutral, but it knocked down its price target from $187 to just $165. That new price target represents downside of nearly 25% from the current stock price. Goldman analyst Rod Hall expects the free Apple TV+ offer to be accounted for as a $60 discount, which would reduce average selling prices for the eligible hardware products. Apple no longer discloses unit sales numbers, so ASPs can't be calculated directly from its reported results.
Related to Apple's streaming efforts, The Hollywood Reporter reported on Friday that media creator J.J. Abrams turned down a deal with Apple in favor of AT&T's WarnerMedia, despite Apple offering far more money. Apple's lack of theatrical distribution, as well as its desire for Abrams to work on Apple projects exclusively, were reportedly factors in that decision. Apple has nearly unlimited resources to snag talent for its video ambitions, but that doesn't matter if creators balk at the company's offers.
The market reacted positively to Apple's iPhone and Apple TV+ reveals, but that sentiment might not last if Goldman is right about the negative effects of the company's strategy.
Altria's Juul investment not looking so hot
Tobacco giant Altria acquired a 35% stake in e-cigarette company Juul last year, valuing the private company at $38 billion. It was a way for Altria to make sure it didn't miss the boat, given how popular e-cigarettes had become.
But news about major health problems and deaths tied to vaping and the possibility that the U.S. government will ban flavored e-cigarettes has unsurprisingly hurt Juul's private valuation. CNBC reported Friday morning that Juul is currently being valued between $225 and $230 per share, well below the $250 per share Altria paid last year.
Shares of Altria were down 2.5% at 12:45 p.m. EDT Friday as investors grappled with its e-cigarette predicament. On top of a potential ban on flavored e-cigarettes, the FDA recently warned Juul about its marketing. The FDA has determined that the company has marketed its products as modified-risk tobacco products without an appropriate FDA order.
The range of possible scenarios from here is wide, but a further collapse of Juul's valuation isn't out of the question. That would be bad news for Altria's big bet on the e-cig start-up.
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