Instinet downgraded Apple Inc. (NASDAQ:AAPL) to “neutral” from “buy” and lowered its price target to $175 from $185 — a slight discount to last night’s close at $176.42 — citing expectations for limited upside to iPhone X sales. The brokerage firm also cut its full-year earnings per share estimates for both 2018 and 2019. In reaction, AAPL stock is 0.8% lower in pre-market trading.
An Apple downgrade is rare, with 23 of the 30 analysts following the stock maintaining a “buy” or better rating at last night’s close. Plus, the average 12-month price target of $187.58 stands comfortably above yesterday’s record high of $177.20.
Longer term, AAPL is up 52.3% year-to-date — one of the top Dow stocks so far this year, and pacing toward its best annual return since 2010. While today’s pullback could throw a short-term wrench in Apple’s 2017 momentum, the shares may find a foothold near $174 — home to last week’s highs — while below here is familiar support at the 40-day moving average, currently located at $170.
Apple options traders have been quick to initiate long calls relative to puts in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock’s 50-day call/put volume ratio of 2.21 ranks higher than 75% of all comparable readings taken in the past year.
And those targeting short-term options can currently buy premium at attractive levels. Apple’s Schaeffer’s Volatility Index (SVI) of 17% ranks in the 18th annual percentile, indicating muted volatility expectations are being priced into near-term contracts. Plus, AAPL stock has consistently rewarded premium buyers over the last 12 months, per its Schaeffer’s Volatility Scorecard (SVS) of 98.
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